When planning a debt free life it is important you understand the types of personal debts you owe and see things in a right perspective.
Any debt that is a result of borrowing money for any purchase that has future value built in, for example: a home purchase, investment or a student loan for college education. These types of debts are known to be “good” because they can help you build wealth and success.
A mortgage loan is the most popular personal good debt! You take a loan, which will financially help you build or buy a home. It is considered as an investment because the home will eventually be yours only!
Debt that can be turned over to debt collection agencies such as credit card debt, personal loans and other unsecured debts are known to be bad debts. These debts often carry high interest rates as well.
In essence anything you purchase with credit or can be financed, that is unsecured (doesn’t require collateral) and devalues with time, is bad debt. Even food and clothes, that are essential, which were purchased with a credit card, are bad debts. Put your effort in keeping bad debts to a minimum while paying the full balance of these debts on time.
Tackle them both.
Keeping good debt apart from bad debt is a wise decision. Don’t make the mistake of consolidating unsecured debt with a mortgage loan, which is secured, by taking a bigger loan and using the difference to pay of bad debt. Not in all cases it is profitable and it can put your asset in risk.
When managing your monthly payments, paying off higher interest rate debt first is highly recommended by most financial experts. By doing so you are reducing the bad debt faster giving you more financial freedom in the future to pay off more debt, in larger sums.
Recommended Reading: Good debt, bad debt at WiseBread.com
You’ve graduated – congratulations! If you took any student loans in order to pay your college tuition and stuck with a load of payments consider choosing one of the student loan consolidation programs available. Consolidating your loans will make life much easier. Knowing that you will only have to make one, instead of several payments per month, is only one of many benefits student loan consolidation programs include.
Student Loan Consolidation Program Benefits
By consolidating your loans you will be enjoying a fixed rate and one payment per month. The rate you will be paying should be an average of the rates you are supposed to be paying and should not exceed a maximum of 8.25%. In fact, many lenders offer rates low as 4.5% which I believe is incredible. Use a student loan payment calculator,When choosing a student loan consolidation program, to find whether you will get an interest deduction or not.
Another great benefit you will be enjoying with a student loan debt consolidation program, especially if you have to payback private loans for students with bad credit, is a boost of your credit ratings. The fact that you consolidate other loans means that you paid them off which basically means your credit ratings improved.
I would like to consolidate federal student loans with private ones, should I?
Federal student loans should be consolidated without hesitation however, do not consolidate them with private student loans the rate you will be paying will be a very high one. Do not consolidate Perkins loans because the student loan repayment plan offers a fixed rate and relatively low one as well. The most important thing to know is to consolidate the loans that do not include fixed rates. Consolidate private and federal loans separately and pay attention to the interest you will be paying if the total interest you are quoted to pay is higher than your original interest don’t apply for a loan.
Do some due diligence prior to you making this important decision and don’t forget to compare rates and offers from various lenders. Take your time when looking into this subject and make sure that you overview enough student loan consolidation programs to make a financially educated decision.
When college is over and you are left with multiple student loan repayments and sometimes even in debt, consolidating your student loans will help manage your loan repayments and even help save some money. Though consolidating your student loans can be found very useful there are different factors you should take into consideration before making a decision.
Consolidating Student Credit Card Debt
It is important to know that when you join a debt consolidation program you will consolidate your debts that have aroused from student loans you have applied for during or before your studies. Most debt consolidation service providers do not provide programs for consolidating credit card debt. Do some research covering the topic of personal debt consolidation solutions for different solutions and ways to pay off credit card debt.
Consolidating Student Loans that have Fixed Rates with Variable Rates
When you were granted the student loan a repayment plan was also given to you. Federal student loans such as a Perkins Loan offer fixed and low interest rates. Consolidating these types of loans with other variable interest student loans will not be beneficial. The interest rate you are quoted will not exceed a fixed 8.25% interest rate, whether or not the average of the interest rates you have to repay is higher than 8.25%. Therefore, logic dictates that it is best to consolidate high variable interest debts. Doing so you will enjoy a fixed, and if lucky, averaged lower rate.
Consolidating Federal Student Loans with Private Student Loans
These two types of student debts should not be consolidated as one. Further more there aren’t many, if any organizations that will allow you to consolidate these loans. If you are in debt because of private student loans and federal student loans you may still consolidate them, but separately.
A flexible student loan repayment plan is known to be one of the most important ingredients a beneficial student loan has to offer. Whether a federal student loan or private one is considered by the borrower, a student loan payment calculator will be very useful for comparing different repayment plans.
So Many Repayment Plans, Which One to Choose?
When applying for a private student loan the most important issue to remember is making sure the student loan repayment plan is the most comfortable for you. Some borrowers will want to choose a shorter repayment plan. They take in to consideration that the interest will be lower and they will be able to pay back the loan in a short period of time.
Student loan consolidation programs are usually not part of a standard student loan repayment plan when still attending college. If found in a debt situation after graduation and you are still having trouble paying back the student loans, a student loan debt consolidation can be a good way to eliminate debt and improve bad credit.
Good Repayment Plans for Students with Bad Credit Ratings?
The vast majority of bad credit student private loans have flexible repayment plans. They have to! If they won’t they will be out of business due to the competitive market nowadays. The rates, on the other hand, are high compared to the bad credit federal student loans.
Student Loan Repayment Tip: Choose a repayment plan based on the interest rate. Get the lowest interest rate with the longest repayment period. When grace period arrives, consolidate your loans by joining a student loan consolidation program. Most likely, you will be offered a new student loan repayment plan and much better than the original one!
Applying for a student loan may seem to be a simple procedure – and it should but, for some reason students with bad credit seem to have troubles being labeled as “bad credit” when applying for a loan. Truth of the matter is that students with bad credit ratings can get approved for a bad credit student private loan. They may also get approved for a federal student loan, where credit checking is not required.
Bad Credit Federal Student Loans Approvals
One of the biggest benefits federal student loans include is the equal opportunity for every student. Bad credit history does not mean a thing to the lender when applying for a federal student loan. Lenders assume that the student continued from high school to college and therefore, didn’t have time to build his credit history.
When grace period is over its time to pay back the loan. If the student has several loans to repay, he may apply for one of many online student loan consolidation programs. These programs will help manage the repayments and consolidate them into one loan therefore, paying once a month at a fixed, lower rate. Student loan debt consolidation will also benefit the student with a better credit history, improving bad credit.
Private Loan for a Student with Bad Credit Ratings
If you have defaulted federal student loans your next best option is a private student loan. Private loans for students with bad credit are usually higher than any other type of student loan. By using an online student loan payment calculator you will be able to find the best rate and future repayment plans.
Even though rates bad credit private student loans offer are considered to be high, it does not mean you won’t be able to repay them. Remember that persuading your dream is all that matters, the rest eventually, will work out to be just fine.
Once grace period begins you will have approximately up to 9 months (depending on the type of student loans you have obtained) to choose a student loan repayment plan. Grace period also is a great time to plan your future and find a job. Selecting the best student loan repayment plan requires correct calculation and a student loan payment calculator is just the tool you need.
How to Calculate the Best Repayment Plan?
While understanding that every student loan repayment plan is suitable for different people, use a student loan payment calculator to find out the amount of annual income you would need to repay every type of repayment plan you are offered. Keep in mind that private student loans carry different laws than federal student loans. Once you’ve calculated and found the most attractive plan, see if the annual income you are supposed to get from your new job will cover the repayment plan without putting too much financial pressure on yourself.
Several repayment plans offer a very good interest rate but, require you to pay the loan back in a relatively short period of time. This option would be great for anyone expecting a steady long lasting income source. Remember, finding the most comfortable student loan repayment plan for your case is what matters.
Using a Student Loan Payment Calculator to Calculate Several Student Loans
If during college you have obtained more than one student loans, not necessarily do you need to choose a separate repayment plan for each one. Student loan debt consolidation will be an ideal solution for you. By applying for a student loan consolidation program you will have the ability to merge all your loans in to one and manage them with a low, fixed rate monthly payment.
People that have obtained private loans for student with bad credit will benefit from consolidating their loans as well. The fact that you paid off your debt all at once will boost your credit ratings. When consolidating student loans be sure to use a student loan payment calculator to find the best student loan consolidation repayment plan. Don’t forget to compare offers from 3 different lenders to get a better idea of the rates and fees offered and eventually make a financially educated and beneficial decision.
If you’re having trouble qualifying for a Student Loan due to your “bad credit status”, there are still certain actions you can take to get approved. First try to get one of the federal student loans available. Be sure to do this properly, meaning, apply for all loans offered by the government, before applying for a Private Student Loan.
A PLUS loan can be suitable for you if your parents have better credit ratings than you and are willing to help you, by taking the responsibility of borrowing the needed money for you.
No Success with Federal Student Loans, Are Private Student Loans OK?
Defaulted federal student loans are one of the main reasons for not getting approved for a federal student loan. Bad Credit is not an issue when it comes to federal loans. The lender assumes that the student will go from high school to college and therefore, could not build a credit history. If you’ve tried and for any reason your student loan application was declined, a private loan for a student with bad credit can be the next best solution for you.
Private student loans for students with bad credit ratings will naturally carry higher interest rates than federal student loans or private loans for excellent credit ratings. Using student loan payment calculatorswill help you compare offers for different online lenders and by choosing a proper student loan repayment plan you might even be surprised of getting an attractive student loan offer.
School is Over, Why Stay Stuck with Bad Credit?
Once you’ve graduated, grace period (lasting up to 9 months depending on the loans you have obtained) will begin. During this time you can start looking for a job and choose your student loan repayment plan. If you have borrowed a minimum of $7,500 in more than one student loan, joining a student loan consolidation program will be beneficial. Not only will you benefit from a fixed, lower monthly interest rate and payment but, consolidating your student loan debt will also improve your bad credit ratings.
Once graduated and grace period starts you should begin searching for a job. If you have obtained student loans during your college studies, grace period will be the best time for you to choose a Student Loan Repayment Plan that will fit your needs. It is important not to panic about paying back the debt you owe. Panicking leads to confusion and confusion won’t help you at all. By using a trustable student loan payment calculator you will be able to find the best repayment plan available to work with.
The Type of Student Loan Repayment Options Available
Federal student loans carry different loan repayment laws than private student loans. However, similarity exists between the 2 types of loans. For example, in both cases, loan repayment begins 6 – 9 months after graduation. The student loan repayment plans available are designed to help students repay their loans in the most flexible way possible, on a case to case basis. Amongst the most popular types of loan are the following:
- Level / Standard Repayment Plan
- Graduated Repayment Plan
- Income Sensitive Repayment Plan
- Extended Repayment Plan
Choosing a Student Loan Repayment Plan
As understood you should choose a repayment plan based on your financial capabilities. The Standard repayment plan is the default plan you get. It allows the student to pay back the loan over a 10 year period. Monthly payments don’t change during the repayment period.
A Graduated repayment plan will allow you to pay a fixed, smaller amount monthly during the first few years. With time the amount will grow. This repayment plan will be found suitable for people expecting a fixed income.
Choosing an Income Sensitive Repayment Plan is in fact like choosing a Graduated repayment plan except for 1 difference. You will be paying a certain percentage from your income.
Extended repayment plans allow you to pay off your debt in small amounts over a period of 25 – 30 years. This repayment plans carries the highest interest rates.
I Have a Few Student Loans to Pay Back, Which Repayment Plan Should I Work With?
Consolidating student loan debts is wise for any student that has obtained more than 1 student loan and owes more than $7,500 in total. Student loan consolidation programs help you reduce the interest you are supposed to pay and help you get a fixed rate. If you have obtained private loans for students labeled as bad credit, once you consolidate all your loans your credit ratings will improve instantly.
It is always clever to compare a few offers from at least 3 different lenders before consolidating loans or applying for one.