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Personal Student Loans
By miranda | February 4, 2008
Personal loans often come with lower interest rates than credit cards. A typical 5-year loan with interest rates of 8 percent or higher can yield a better return than a fixed-rate credit card with an annual percentage rate of 23 percent, says Mark Kantrowitz, author of “Debt-Free,” a book aimed at millennials.
“I think they’re coming out with a whole lot more options for college loan products,” Kantrowitz said. “There’s a lot more choices out there for consumers.”
Kantrowitz added that the average student loan balance has gone up over the last 10 years, but this year’s numbers show the rate of increase is much less than before.
While the average student loan balance has gone up, the cost of the debt hasn’t. That means students are paying more than they would have if they were paying off their student loans in the traditional sense.
How to Make the Most of Your Student Loan Debt
How do you pay off student loans? There are many ways to do so, but here are a few options that are both cheap and effective: 1. Cash-out refinancing: To get your loans paid off, you need to have your loans forgiven. However, there are alternatives to refinancing. One is a “cash-out refinance,” which is when you combine your existing loans into one loan, and the process to get the right loan is essential to perform background checks to know what type of loan you can have access too, since there are loans which are not very hard to get online depending of the type. This allows you to refinance your existing loans and then have your principal forgiven. The interest you would pay on the refinance would be less than the interest you would pay on a new loan. This can save you $15,000 to $30,000 per year. 2. Borrowing money with the intention of paying it back later: For instance, your car loan may have a fixed monthly payment, but you have an intention to buy a used car. With this type of loan, you will need to take out a second loan to buy the vehicle you wish to drive. Although the interest rate on the second loan will be lower, you will need to borrow money to make the car purchase. 3. FHA Loans: FHA mortgages provide low-interest loans to qualified borrowers. These loans have a fixed rate for up to 25 years and usually include a down payment. 4. Borrowing money with the intention to pay it back later, and then selling the home (or the car): This is known as a REO. Most REO borrowers receive a lower rate for refinancing a mortgage they are already in and thus are able to save a lot on interest. 5. FHA-insured mortgages: The government-backed Federal Housing Administration (FHA) guarantees the loan of a home purchased by qualified people. This means the FHA insurance covers the borrower and the mortgage lender.
The following are some of the important facts you should keep in mind when looking for your next house: 1) The interest rate on the mortgage will usually be higher than what the loan amount allows. 2) The cost of mortgage insurance is included in the loan amount. This means the difference is added to your loan. 3) A high-end home in a desirable area usually costs more than a low-end home in the same area. 4) FHA loans require more down payment.
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