LINK – Are Federal Student Loans Beneficial?

Have you taken a scholarship for your education? But still looking for ways to pay off your educational requirements?

Then apply for a federal student loan. They are easier to avail, cheaper as well as flexible. Discussed below are the ways of getting benefitted by taking a federal student loan.

Credit Check Not Needed:

Credit history is required by private banks to show how likely you repay your loan on time. It is also used to find out the interest rate at which you will be able to avail the loan.

But most students either did not have the chance to build up a credit history at all or may a low credit score. Federal loans are easy to qualify for. Unlike private bank loans, these loans can be applied for by any undergraduate who has financial requirements without any sufficient income and credit check.

 Co-signer Is Not Required:

Students without a credit history can still avail private loans if you get a co-signer. A co-signer is basically an adult having a well established and good credit history.

Mostly a parent or in some cases grandparents become a co-signer and agrees in paying off the balance if the student defaults during loan repayment. The consequences related to default are huge. So think a lot before co-signing.

But since federal loans are not based on credit history, a co-signer is not needed. So none of your family members have to take any responsibility for your loan repayment.

Rate Of Interests Are Fixed:

The interest rate for federal loans is fixed. So they will be constant during the entire loan period. Since federal loans will have a fixed rate of interest, so the rate that you will agree upon will never ever change. It will never be increased thus making you pay more money.

But private loans will never come with such security. They usually have variable rates and can easily change during the tenure of the loan repayment.

An interest rate that is variable may start off very low but has a chance of rising substantially as well as remaining high.

Lower Interest Rates:

The interest rate of private banks depends on your or your cosigner’s credit score. They are higher as private loans are risky for lenders. But federal loans will have lower rates of interest compared to the private banks.

During the year 2016-2017, the interest rate of the federal loan was 3.76 % for the undergraduates. You can opt for a lower rate of interest through student loan refinancing if you have a good credit history along with income after you graduate.

Deferment In Loan Repayment Allowed

Due to financial issues, if you are not able to afford repayments temporarily, then deferment will let you postpone your payments or lower them for almost three years.

Another program of federal loan known as forbearance will allow you to pause the payments until one year at one time. Private loans are never this much flexible.

Private lenders may lower the rate of interest or allow you to pay the interests only for some period. But not all private lenders will act the same way.

 Payment Of Interest By Government On Subsidized Loans:

Not all but some federal loans are subsidized. So when you are attending school or college, you will not be accruing any interest on the loan. The government will pay the loan’s interest for you.

You can enjoy this benefit until the grace period after you will leave school. If you need to defer the payments to a later period, then during the duration of loan deferment this benefit can be utilized.

Students who required huger financial help to pay for their education qualification for this federal subsidized loan. Private loans will never give you this benefit. Interest will accumulate of the private and unsubsidized federal loans from the time they are given to you. 

Loan Cancellation Guaranteed On Demise:

The U.S. Department of Education states that if students die or become permanently disabled, then the government will be canceling the loan automatically and discharging their debts. So there is no need for the loan repayment.

Any parent will also be discharged along with the loans that are taken for you if your parent holding the loan dies. But death discharge is never a guarantee for private loans.

Options Of Loan Forgiveness:

If you take a student loan you are responsible for paying the money along with the interest. If you take loans from a private bank or lenders, there will be no forgiveness opportunity. You will be responsible for paying off the total balance.

But there are some federal loans that can be forgiven. The balance can be cleared off. In case of federal loans repayment if you take part in a repayment plan that is income driven or work for the government or at any non-profit company then the loans can be dissolved.

So with these various benefits of federal student loan, it is very clear that taking government funding for education is better than availing private loans.…

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What Are The Benefits Of Having A Mortgage?

Do you wish to own a home in the US? To purchase a house, most of the people need to take a mortgage. Taking a mortgage is an important decision. Hence it should always be taken after proper discussions. Here are some benefits to aiding you to take a mortgage.

Cost-efficient Borrowing:

The rate of interest on borrowing is mostly much lower than the other types. This is because the loan is basically secured against the property. So the bank or the building society will have the security that in case everything goes wrong as well as you are unable to repay it, there will be something worthy enough to sell in order to pay back a little, if not the complete mortgage.

Lenders are seen to offer various mortgages like fixed-rate, discounted deals as well as trackers. It is very much possible to get hold of a certain deal of mortgage that will be ideal for your needs and thus turn it into a reasonable option. There are various schemes issued by the government to aid people in buying their first home.

There are also few schemes of shared-ownership from where you will only be able to buy a part of any property. You can rent on that proportion on which you do not have ownership yet and are taken care of by the housing trusts or maybe a local council.

Home Ownership Achieved:

With the aid of a mortgage, you will be able to buy a home and you do not have to pay the total cost in cash. You have to make down payment, which is a fraction of the purchase cost.

Many homeowners are seen to pay down something between 10-20 %. Using a mortgage to buy a home will free up the available income flow for various other things such as renovation. If a mortgage is not used to buy a home, like a home equity loan will give you access to some funds when you will actually require the money.

These can be used mainly for repairs and improvements of home. So one of your biggest purchases will be buying a home and mortgage will be the largest debt. Since you will be able to spread the loan repayments on the home loan for many years, the amount that you will be paying off each year will be manageable as well as affordable.

Individuals, who take their first mortgage loan, traditionally apply for a term of 25 years. But this is not a fixed rule and since retirement age is increasing, a mortgage of 30 years is turning out to be very common.

This will bring down your monthly payments but on the other hand, you will be having a burden of debt for longer. So always opt for the shortest term that you will be able to afford. You will be mortgage free very soon and will also be saving lots of interest.

Convenient Repayment:

If you take a mortgage loan, you never need to make repayments at once. Monthly installments can be used to make payments. You can avail a loan with a term more than 25 years in order to make repayments as installments.

It makes repayment much easier, as one installment will never be as big as the amount in comparison to the salary you receive. The mortgage will be repaid slowly every month. Depending on the rate of interest, the monthly repayments can become much lower than any rent that you would have paid in the area you reside in.

Tax Benefits:

The mortgage that you have may appear to be the best tax break available. By taking a mortgage loan, a person will qualify for benefits from income tax. You will be able to deduct the interest that you pay on the mortgage loan and this is vital during the early loan years as most of the monthly repayments will include interest. It will also minimize the tax amount that should be paid to the government.

The repayment money for interest may not be included in the tax. You can deduct all interest that you pay on a mortgage loan till $750000 if you file Form 1040 as well as itemize the deduction on Schedule A.

There are also other loan costs like the insurance of private mortgage as well as homeowners insurance that will provide you with tax deductions, only if you qualify.

If you buy points which actually are a way of pay an extra loan percentage up front in exchange for a lower rate of interest, you will also be able to deduct their buying price. For this reason, many people prefer to apply and take a loan second time for buying a new property or may a house once they have paid off the first one.

So now you are fully aware of the ways to get benefitted by a mortgage. There are various mortgages available. Find out something that will suit you well and take it.…

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Why Should You Take 401k Loan?

Every individual keeps an emergency fund that can be drawn out when they face any unplanned expenses. But most often a shortage of cash flow happens during one’s requirement. For some people savings in the 401k loan is their biggest financial asset for retirement. Discussed below are the reasons for taking a 401k loan.

Easy And Fast Option:

In most of the plans of 401k, a loan request can be made easily and very fast rather than going for a loan from a commercial lender. It requires no long application or even check of credit history. It normally never generates any inquiry against your credit and affects the credit score.

There are many of these loans that will let you make loan requests with the help of few clicks on an online portal. One of the innovations that have been adopted now by some of the plans is the use of a debit card through which several loans can be applied in small amounts instantly.

So there are no qualifying needs to take a 401k loan. This will help those employees who may never qualify for any commercial loan based on their credit score or present financial status.

Flexibility During Repayment:

For most of the loans taken from 401k, an amortizing repayment schedule of 5 years is usually specified by regulations. But you can repay the loan faster without any paying any penalty for prepayment. Most of the 401k plans will allow loan repayments to be made easily through some payroll deductions.

The plan statements will show credits to your 401k loan account as well as your principal balance that is remaining similar to a regular loan statement of a bank.

So if you take a loan to purchase a home, you may have till 10 years to make the repayment along with interest. Loan payments will be deducted from the paycheque, thus making repayment convenient as well as consistent.

Low-Cost Option:

If a huge financial setback has affected you and has declared bankruptcy, then there will occur a drop in the credit score. This will make it tough to avail credit at reasonable rates.

In situations, where a very low credit score will lead to the rise in the rate of interest such as 2-4% higher than the normal rates, 401k loans will provide you with a less costly option.

But remember this that the interest that you will be saving by selecting a 401k loan over any other bank loan will still not balance the earning loss from taking your money out. You may also face penalty tax for making use of the funds.

The rate of interest on a 401k loan will be lower than those loans that you could have obtained through a commercial lender or a credit card, making repayment of loans cheaper.

Beneficial For Retirement:

When you make repayments to the 401k loan account, the repayments will be allocated back to your investment’s portfolio. You will be repaying a little more than you borrowed from the 401k loan and this is because you have to pay the interest.

The loan will produce a neutral impact on an individual’s retirement if any of the lost earnings from the investments match the paid interest that is earning opportunities are balanced by each dollar through interest payments.

If the paid interest exceeds any lost earnings made from the investments, opting for a 401k loan will actually increase the process of retirement savings.

Smart Investment:

If purchasing a home or financing your education requires you to borrow from a 401k loan then it will be worth considering under some circumstances. For the homebuyers, the period of repayment is extended often.

For education, it means investing in yourself. So higher earnings come from it, you can save a huge amount for your retirement. You only need to be sure that the investment, be it a house or an advanced degree is very close to a proposition that cannot be missed.

Secured Job:

Always have a good feeling regarding your employment situation before borrowing from a 401k loan. If you leave or lose your job, you have to repay the balance of the loan within 2 months. IRS will also label that money you have taken out as an early withdrawal.

This means a 10% penalty will hit you and you will owe some income taxes on that amount. You need to take into consideration the projected income during the 5 years period of loan repayment.

Payments from a 401k loan are mostly taken after tax-basis out of paycheque. So be sure that you will be able to continue without that money taken from the take-home payment.

So it may be difficult to focus on your future when you currently face financial pressures. So just stand by your decision of borrowing from a 401k and avail it.…

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