Personal Loan Blog

Do you have a job lined up for the summer? Are you planning a great vacation? Taking a summer class? Whatever youre up to, we want to know about it! Take our poll to let us know what youre plans are this summer

ScholarshipPoints members, login to ScholarshipPoints now to redeem the code SUMMERPLANS for 15 scholarship points. Code expires on Wednesday, June 1st, 2011.

Last week, this blog (Poor credit auto loans are within reach) reported on research that suggested that lenders are approving more auto loans for people with poor credit. On Thursday, Experian, one of the nation’s big-three credit bureaus, published a new survey that confirmed the trend.

Auto loans for prime and subprime borrowers

People with stellar credit scores could generally obtain auto loans (although some were turned down) even in the darkest days of the Great Recession. However, lesser mortals, who had either good or poor credit reports, frequently found it impossible to finance a car purchase.

The extent to which this has changed was reinforced last Thursday when Experian released new data that showed that the share of auto loans for new vehicles going to subprime borrowers was up by 11.1 percent between the first quarters of 2010 and 2011. People with damaged credit made up 10.57 percent of all buyers during the first three months of this year, compared with 9.81 percent during the same time last year.

The average credit score of new car purchasers in that quarter fell to 766 from 776 a year earlier. In a press release, Melinda Zabritski, Experian’s director of automotive credit, remarked:

As the automotive credit market continues to stabilize, lenders are showing a higher tolerance for risk. Thirty-day delinquencies are at their lowest point since Q4 2008, giving lenders a little more leeway in their loan decisions. Additionally, with lower average scores for new vehicle loans and more loan activity for credit-challenged customers, it is easier to find a loan now than at any time in the past 30 months.

Not all subprime borrowers are bad risks

As reported here last week, many lenders say that they plan to discriminate between subprime borrowers when considering applications for auto loans. They intend to try to identify which are deadbeats and which are fundamentally creditworthy people who’ve experienced–and emerged from–short-term difficulties.

One way in which they could do this was revealed last week by TransUnion, another of the big-three credit bureaus. It found that those who’d previously fallen behind with multiple accounts were more than twice as likely as those who’d been delinquent only with their mortgages to now be 60 days or more behind with their new auto loans. In other words, borrowers who’d let their mortgages slide but had stayed current with their credit cards, and personal, student and previous auto loans were now more creditworthy than those who’d kept up with their mortgages, but fallen behind with multiple other accounts.

Auto loans and mortgages

In some ways this is extraordinary, because credit counselors tend to advise those in trouble to prioritize their mortgages over all other debt. However, the new figures seem reliable, and Steve Chaouki, group vice president in TransUnion’s financial services business unit, sees them as significant for lenders:

There appears to be a pocket of opportunity among mortgage-only defaulters… This new market segment that the recession created is an important one for lenders to understand. They have the potential, today, to be stronger and more reliable customers.

Quotes for auto loans

Don’t forget that, whatever your credit score, you can request competitive quotes for auto loans on this site.

Six months after graduation, those first student loan bills start arriving and for a Florida student in 2009, the average amount owed was about $21,000, according to the California-based Institute for College Access & Success. In this market, many graduates are unable to get the high-paying jobs needed to pay that debt.

Student loan debt nationwide now tops $913 billion and surpassed credit card debt for the first time last year, a study from college financial aid website FinAid has found.

SSI, or supplemental security income, is income provided by the Social Security Administration for people with low income who are blind, disabled or over the age of 65. Your SSI award letter — also known as a proof of income letter — is a letter stating what your monthly SSI benefits are. You can use your SSI award letter as proof of income when you are applying for services in which eligibility is based on income, and you can also use it as proof of disability.

Difficulty: Easy

Instructions

1. • 1Go to the Social Security Administration benefits verification website to request a copy of your SSI award letter. Click “Start” at the bottom of the page to begin.
   • 2Enter in the information requested such as your Social Security number, name and date of birth, then click “Continue.”
   • 3Indicate what information you would like to include in your award letter. You can choose to include all benefit information, or you can choose to include only some information. The information you will need depends on what you will be using the letter for. Click “Continue” to submit your request.
   • 4Print the confirmation page to keep in your records. Your SSI award letter should arrive in the mail within about 10 days of your request.

Q: Are there specific student loans for part time students in college, or do part time college students apply for the same financial aid and student loans as full time college students?

A: For federal financial aid, including federal student loans, a student’s full or part time status can affect how much financial aid they will qualify for, or if they will qualify at all. Most schools will consider anything over 6 credits as part time, however part time and full time student status requirements can be different for each school. Students must check with their school to be clear on the requirements for fulfilling part time student status. Part time students are eligible for federal financial aid, including federal student loans for part time students, while students who are considered below part time are not eligible for federal financial aid.

For some federal student loans, such as the Perkins and subsidized Stafford, the amount a student will qualify for can be dependant on their status as either a part time student or a full time student. The amount a student will receive from federal student loans that are not based on financial need (unsubsidized Stafford) will typically not be related to their status as a full or part time student (students must be a part time student to qualify for federal student loans). As for private student loans for part time students, typically students must be enrolled at least part time in an undergraduate program at an accredited and approved college or university to qualify. If a student is considered as part time status by their college or university, they should be able to apply for FAFSA and private student loans in the same way full time students do.

Americans now owe more money on students loans than on credit cards. But many people graduate from college and struggle for years to pay back student loans. If you are a parent or student wondering if it’s worth borrowing money for school, here are some things to consider.

• Getting a degree is a smart move that can result in higher earnings over a lifetime, compared with what you’d earn with just a high school diploma. Yes, the job market is tough right now, but many employers are looking for people with college degrees. Do some research to find out what fields have a strong outlook for hiring.
• Don’t rely only on loans to pay for an education. While financial aid is available and includes loans, many students are choosing to work their way through school to avoid taking on too much debt. It is also important to search for scholarship and grant programs for which you might qualify.
• Don’t borrow more money that you can reasonably expect to earn on your first job. “It’s smart if [borrowing is] enabling you to invest in your future,” Mark Kantrowitz, publisher of FinAid, told NPR. “But if you borrow more than your expected starting salary after you graduate, you’re going to struggle to pay your loans.”
• Parents should not shackle themselves to a bunch of student loans at the expense of funding their own retirement. Not putting away money for your golden years is a huge mistake. While many parents want to help their kids through school, it is a bad idea to overdo it with parental loans if it will be a struggle to repay them.
• Attend a less expensive school if necessary. Public four-year colleges charge in-state students an average of $7,605 a year in tuition and fees, according to the College Board. Private four-year schools charge an average of $27,293 a year. Attending a public two-year college will set you back an average of $2,713 a year in tuition and fees. While attending an elite school does have advantages, there are many people who attended less expensive schools and are doing quite well in their careers.

Paying back loans

Finally, if you choose to borrow federal student loans to pay for an education, the government expects to be repaid. Student loan debt generally cannot be discharged in a bankruptcy. So if you get loans eventually you’ll have to find a way to repay them.

IBR is a repayment plan offered for most federal loans. The standard 10 year repayment plan calculates monthly payments based on the amount of your loans, but IBR is different because it is determined based on your ie. If you have a high debt to ie ratio, then IBR can help to lower your monthly payment amounts.

IBR is available for all federal loans except for Parent PLUS, and Parent PLUS consolidation loans. Eligibility is determined by ie, and family size. Below is a chart for determining monthly payments. The amounts shown are the maximums, and an individuals monthly payment could potentially be lower.

Annual Ie Family Size 1 2 3 4 5 6 7 $10,000 $0 $0 $0 $0 $0 $0 $0 $15,000 $0 $0 $0 $0 $0 $0 $0 $20,000 $46 $0 $0 $0 $0 $0 $0 $25,000 $108 $37 $0 $0 $0 $0 $0 $30,000 $171 $99 $28 $0 $0 $0 $0 $35,000 $233 $162 $90 $18 $0 $0 $0 $40,000 $296 $224 $153 $81 $9 $0 $0 $45,000 $358 $287 $215 $143 $72 $0 $0 $50,000 $421 $349 $278 $206 $134 $63 $0 $55,000 $483 $412 $340 $268 $197 $125 $54 $60,000 $546 $474 $403 $331 $259 $188 $116 $65,000 $608 $537 $465 $393 $322 $250 $179 $70,000 $671 $599 $528 $456 $384 $313 $241

If your IBR repayment amount is lower than if you were on the 10 year plan, then you are eligible. But if you notice the bottom left of the chart, numbers can start to get high. In these situations, a standard repayment plan would have lower monthly payments, and therefore, a person would be ineligible for IBR.

While some of the benefits are obvious others might not be. Here are some other perks you may not be aware of.

• Interest Payment- If your loan payments do not cover interest accrued, the government will pay any unpaid interest for up to 3 years.
• Cancellation- After 25 years of repayment, the remainder of the loan can be cancelled.
• Forgiveness- Like most federal loans, public service employees can have their loans forgiven after 120 consecutive payments .

While IBR can initially seem like a great option, there are a couple of downsides I should mention. Because your monthly payments would be lower, the overall term of the loan would be longer. This is an issue because a longer term means more interest accruing, and therefore, you will pay more money in the long run.

Another downside is that IBR requires yearly documentation to be provided to your lender. Each year your loan is adjusted based on your ie, so if you get a raise, this will be reflected in your monthly payments.

To apply for ie based repayment, you need to contact the servicer of your federal loan. For Direct loans, this would be the Department of Educations Direct Loan Center.  If you do not know who services your loan, go to www.nslds.ed.gov andplete a financial aid review.