Character loans are extensions of funding that are granted based on factors other than the declaration of collateral. Generally, a character loan is granted when the lender determines that the loan will be repaid in a timely manner without the need for some sort of security. Signature loans are one common form of the character loan.
A lender may choose to extend a character loan based on a couple of factors. First, the lender may be very familiar with the reputation of the borrower, and have every confidence in the ability of the applicant to repay the loan according to terms. This approach was often employed with long standing clients of local banks in times past, and continues to be somewhat common in many smaller bank chains. The lender often will have dealt with the borrower in the past, and have found the business relationship to be mutually beneficial. When this is the case, there is usually not any problem in obtaining the character loan.
The second factor has to do with the personal credit history of the applicant. Even if the lender has not had prior business dealings with the borrower, it may still be able to obtain a character loan based on this consideration. By checking the credit history of the individual, the lender can get a good idea of the current level of indebtedness in comparison to income and how well the applicant keeps up payments on current debts.
Persons who are able to obtain character loans tend to exhibit a great deal of business and financial integrity. The dedication to repaying debts on time and keeping finances in order will often increase the confidence level of many lenders, and at least open the door for negotiations. When this high level of credit worthiness is coupled with possessing an excellent reputation in the business community, the potential for being able to obtain a character loan is very good.
Tuesday, February 5, 2008
A collateral loan
A collateral loan is also called a secured loan. It is a loan obtained from a banking or other financial institution, where in exchange, the creditor may sell that which is offered for collateral if the loan is unpaid. A collateral loan is often offered at a lower interest rate than an unsecured loan, because there is a guarantee of repayment should the borrower default on the loan.
A collateral loan may use different things to secure the loan. Often people use stocks or bonds to establish a collateral loan. They can use their ownership in property, where a portion of perhaps a home, or a piece of land, is set up as collateral. If the borrower defaults, he must sell the property to pay back the loan, and the lender has rights to sell the property also, even if only a portion of the full value belongs to them. In these cases, a lender would sell the home, and give the previous owner the monies not offered on collateral.
A collateral loan may also be based on expected collateral, like the expected return on a harvested crop, or on an investment. Occasionally, one can use property like high-valued jewelry as collateral, or other high-valued goods. This is rare, as most collateral loans are based on paper assets, or on real estate.
If the collateral given decreases in value and the borrower defaults, he or she will still be responsible to repay the amount at which the collateral was previously assessed. For example, a person borrows $100,000 on a home of the same value. If the home decreases in value, say to $75,000, the borrower must still pay back the full amount, as dictated by the terms of the collateral loan. If a borrower has defaulted on the collateral loan, his or her home will be sold. However, the borrower will still owe the lender $25,000. This may require the borrower to sell more possessions or enter bankruptcy.
In most cases, people will not borrow to the full value of a possession offered as collateral to avoid the circumstances described above. Instead, the collateral loan is usually only a portion of the full value of a possession, or of paper trading like stocks and bonds. People with a number of high value items, properties, or stocks and bonds can of course get larger collateral loans. However, with any loan, it is best to borrow only what one needs, since interest rates will still mean a higher payback than the actual money borrowed.
A collateral loan may use different things to secure the loan. Often people use stocks or bonds to establish a collateral loan. They can use their ownership in property, where a portion of perhaps a home, or a piece of land, is set up as collateral. If the borrower defaults, he must sell the property to pay back the loan, and the lender has rights to sell the property also, even if only a portion of the full value belongs to them. In these cases, a lender would sell the home, and give the previous owner the monies not offered on collateral.
A collateral loan may also be based on expected collateral, like the expected return on a harvested crop, or on an investment. Occasionally, one can use property like high-valued jewelry as collateral, or other high-valued goods. This is rare, as most collateral loans are based on paper assets, or on real estate.
If the collateral given decreases in value and the borrower defaults, he or she will still be responsible to repay the amount at which the collateral was previously assessed. For example, a person borrows $100,000 on a home of the same value. If the home decreases in value, say to $75,000, the borrower must still pay back the full amount, as dictated by the terms of the collateral loan. If a borrower has defaulted on the collateral loan, his or her home will be sold. However, the borrower will still owe the lender $25,000. This may require the borrower to sell more possessions or enter bankruptcy.
In most cases, people will not borrow to the full value of a possession offered as collateral to avoid the circumstances described above. Instead, the collateral loan is usually only a portion of the full value of a possession, or of paper trading like stocks and bonds. People with a number of high value items, properties, or stocks and bonds can of course get larger collateral loans. However, with any loan, it is best to borrow only what one needs, since interest rates will still mean a higher payback than the actual money borrowed.
Subsidized and unsubsidized loans
The major difference between subsidized and unsubsidized loans involves the payment of interest. With a subsidized loan, someone other than the borrower is responsible for paying the interest on the loan. When a loan is unsubsidized, the borrower must pay interest on the loan, beginning at the time of disbursement.
Often, the differences between subsidized and unsubsidized loans come into play when student loans are involved. When a student acquires a subsidized student loan, another party takes care of the interest. Typically, the entity paying the interest on a subsidized student loan is the federal government. In such cases, the federal government picks up the tab for the student’s loan interest while he or she is enrolled in school. The government also pays the interest on subsidized loans while students are within allowed grace periods and when loans are in deferment.
It is important to note that subsidized loans do not provide complete freedom from paying interest. Once a student is no longer enrolled at least halftime in school, he or she becomes responsible for paying interest on the loan. Interest does not accrue, however, when the loan is in a grace period or deferment. This is one way in which subsidized and unsubsidized loans are alike. At some point, the borrower usually does pay interest.
When an individual obtains an unsubsidized student loan, he or she may be able to avoid paying interest while enrolled in school by capitalizing it. In such cases, the capitalized interest simply adds on to principal amount that must be repaid. Once the student is out of school, he or she will have even more to repay because the new interest on the loan will be based on a combination of the loan principal and the interest that was capitalized during enrollment.
One of the most apparent differences between educational, subsidized and unsubsidized loans involves the demonstration of need. With subsidized loans, students must demonstrate that they have a certain level of need for financial aid. The opposite is true of unsubsidized loans. Unsubsidized loans are typically available to students without regard to their financial circumstances.
Subsidized and unsubsidized loans may be held the same time. This means there is no need to wait to pay off one type of loan before obtaining another. Furthermore, there are some loans that are both subsidized and unsubsidized. With this type of loan, the borrower is responsible for some of the interest on the loan, but not all of it.
There are also subsidized and unsubsidized loans for housing. To be approved for a subsidized home loan, the borrower has to meet certain requirements, such as those related to income and place of residence. Subsidized loans are frequently a part of first-time buyer programs. They are typically designed to help those who would ordinarily have trouble purchasing a home. Unsubsidized home loans are generally not need or residency based.
A loan may be subsidized by any person, charity, organization, or government entity. Both subsidized and unsubsidized loans have specific eligibility and approval requirements. These requirements vary depending upon the type of the loan and the preferences of the lender.
Often, the differences between subsidized and unsubsidized loans come into play when student loans are involved. When a student acquires a subsidized student loan, another party takes care of the interest. Typically, the entity paying the interest on a subsidized student loan is the federal government. In such cases, the federal government picks up the tab for the student’s loan interest while he or she is enrolled in school. The government also pays the interest on subsidized loans while students are within allowed grace periods and when loans are in deferment.
It is important to note that subsidized loans do not provide complete freedom from paying interest. Once a student is no longer enrolled at least halftime in school, he or she becomes responsible for paying interest on the loan. Interest does not accrue, however, when the loan is in a grace period or deferment. This is one way in which subsidized and unsubsidized loans are alike. At some point, the borrower usually does pay interest.
When an individual obtains an unsubsidized student loan, he or she may be able to avoid paying interest while enrolled in school by capitalizing it. In such cases, the capitalized interest simply adds on to principal amount that must be repaid. Once the student is out of school, he or she will have even more to repay because the new interest on the loan will be based on a combination of the loan principal and the interest that was capitalized during enrollment.
One of the most apparent differences between educational, subsidized and unsubsidized loans involves the demonstration of need. With subsidized loans, students must demonstrate that they have a certain level of need for financial aid. The opposite is true of unsubsidized loans. Unsubsidized loans are typically available to students without regard to their financial circumstances.
Subsidized and unsubsidized loans may be held the same time. This means there is no need to wait to pay off one type of loan before obtaining another. Furthermore, there are some loans that are both subsidized and unsubsidized. With this type of loan, the borrower is responsible for some of the interest on the loan, but not all of it.
There are also subsidized and unsubsidized loans for housing. To be approved for a subsidized home loan, the borrower has to meet certain requirements, such as those related to income and place of residence. Subsidized loans are frequently a part of first-time buyer programs. They are typically designed to help those who would ordinarily have trouble purchasing a home. Unsubsidized home loans are generally not need or residency based.
A loan may be subsidized by any person, charity, organization, or government entity. Both subsidized and unsubsidized loans have specific eligibility and approval requirements. These requirements vary depending upon the type of the loan and the preferences of the lender.
A Stafford Loan
A Stafford Loan is a loan for students attending colleges or, in some cases, trade and business schools. Student loans are one of the primary means by which most can pay for their education and additionally offset the financial burden of attending a school on a full-time basis. A Stafford Loan can be obtained by someone attending school at least part time, but will be offered at lower amounts than those for full-time students.
There exist two basic types of Stafford Loan, subsidized and unsubsidized. Neither type requires a credit check. However, to apply for either type of Stafford Loan, one must fill out paperwork that states income. This information is computed with the price of attending a particular school, and an offer is made of the maximum amount one can obtain per academic year.
A Stafford Loan may be reduced or increased depending on other sources of financial aid. For example, a student who receives grants or scholarships will have a reduced offer on loans. Since, in most cases, grants or scholarships do not have to be repaid, reduced loan amounts are advantageous to the student, as they mean less debt obligation when the student graduates.
A subsidized Stafford Loan is need-based. Subsidized loans are guaranteed by the federal government, which pays all interest accruing on the loan while the student remains in school. Since financial aid decisions are made based on tax returns the year prior to attending school, some people do not qualify for subsidized loans. If one is going to quit work to go to school, additional paperwork can be filed to show significant change in financial status, which will change determination of need.
Therefore, those who do not initially qualify for a subsidized Stafford Loan may be able to have their status changed so that the loan is subsidized. This change is valuable because an unsubsidized Stafford Loan ends up being a much costlier loan to repay. Instead of the government paying the interest while the student is in school, the student is responsible for paying the interest.
The student can defer paying the interest until graduation, or when school attendance ends. This results in higher loan payments when repayment starts. To a new graduate, loan payments present a financial challenge. Students can end college owing between 20,000 to over 100,000 US dollars (USD). Loan payments are not always negotiable, and wages may be garnished if a student defaults on a loan.
Further, one cannot clear loans through bankruptcy, so the student is burdened with significant debt from which there is no escape. Some relief may be offered in the form of deferment of the Stafford Loan. Students can defer loans during times of great financial need, serious illness of oneself or an immediate family member, temporary disability, or a return to school with at least six units of coursework. In rare cases of total disability, the loan may be forgiven.
Deferral of a subsidized Stafford Loan will not increase the amount which must be paid back, as the government will again assume responsibility for interest accrual. On the other hand, each time an unsubsidized loan is deferred, the student will increase his or her debt and have higher loan payments when he or she begins to repay the loan.
A Stafford Loan can be obtained through a variety of lenders, and one should give consideration to the repayment policies of each lender before choosing one. Financial aid representatives may advocate for the student choosing several lenders. Students should be aware that schools receive kickbacks and incentives from various lenders, and should treat advice regarding lenders with caution.
Unless financial need requires it, students should keep borrowing to a minimum. They should give consideration to the kinds of fields they may enter upon graduation, and to what degree the salary in these fields will help them to repay loans. Amounts borrowed should be evaluated on the basis of the ability to repay the loan, particularly if one is entering a poorly compensated field. Loan repayment prices begin at 50 USD monthly. Repayment rates on larger loans are generally much higher, and may be between 200 and 300 USD per month.
There exist two basic types of Stafford Loan, subsidized and unsubsidized. Neither type requires a credit check. However, to apply for either type of Stafford Loan, one must fill out paperwork that states income. This information is computed with the price of attending a particular school, and an offer is made of the maximum amount one can obtain per academic year.
A Stafford Loan may be reduced or increased depending on other sources of financial aid. For example, a student who receives grants or scholarships will have a reduced offer on loans. Since, in most cases, grants or scholarships do not have to be repaid, reduced loan amounts are advantageous to the student, as they mean less debt obligation when the student graduates.
A subsidized Stafford Loan is need-based. Subsidized loans are guaranteed by the federal government, which pays all interest accruing on the loan while the student remains in school. Since financial aid decisions are made based on tax returns the year prior to attending school, some people do not qualify for subsidized loans. If one is going to quit work to go to school, additional paperwork can be filed to show significant change in financial status, which will change determination of need.
Therefore, those who do not initially qualify for a subsidized Stafford Loan may be able to have their status changed so that the loan is subsidized. This change is valuable because an unsubsidized Stafford Loan ends up being a much costlier loan to repay. Instead of the government paying the interest while the student is in school, the student is responsible for paying the interest.
The student can defer paying the interest until graduation, or when school attendance ends. This results in higher loan payments when repayment starts. To a new graduate, loan payments present a financial challenge. Students can end college owing between 20,000 to over 100,000 US dollars (USD). Loan payments are not always negotiable, and wages may be garnished if a student defaults on a loan.
Further, one cannot clear loans through bankruptcy, so the student is burdened with significant debt from which there is no escape. Some relief may be offered in the form of deferment of the Stafford Loan. Students can defer loans during times of great financial need, serious illness of oneself or an immediate family member, temporary disability, or a return to school with at least six units of coursework. In rare cases of total disability, the loan may be forgiven.
Deferral of a subsidized Stafford Loan will not increase the amount which must be paid back, as the government will again assume responsibility for interest accrual. On the other hand, each time an unsubsidized loan is deferred, the student will increase his or her debt and have higher loan payments when he or she begins to repay the loan.
A Stafford Loan can be obtained through a variety of lenders, and one should give consideration to the repayment policies of each lender before choosing one. Financial aid representatives may advocate for the student choosing several lenders. Students should be aware that schools receive kickbacks and incentives from various lenders, and should treat advice regarding lenders with caution.
Unless financial need requires it, students should keep borrowing to a minimum. They should give consideration to the kinds of fields they may enter upon graduation, and to what degree the salary in these fields will help them to repay loans. Amounts borrowed should be evaluated on the basis of the ability to repay the loan, particularly if one is entering a poorly compensated field. Loan repayment prices begin at 50 USD monthly. Repayment rates on larger loans are generally much higher, and may be between 200 and 300 USD per month.
Student loans:good or bad?
You can define good debt as borrowing for things that will appreciate in value, or will not depreciate. In other words, when you borrow money to invest in something durable and you’ll see a tangible return on that money, you’ve acquired good debt. Nearly all good debt is characterized by lower interest rates, and it includes loans to purchase property, or to start a business. Student loans are considered good debt under many circumstances because they usually have low interest rates and they represent an investment in your ability to make more money. Since a college educated person is likely to make more money than someone without a college education, most credit agencies see your student loans as good debt.
There are some that argue that any debt is bad debt since you have to pay it off. If you apply for other loans when you already have large student loans, potential creditors will still weigh your debt to income ratio to see if you can really afford to make payments on another loan. When you have several tens of thousands of dollars in student loans, even though this debt is considered “good,” it may still affect your ability to purchase other things with credit, like homes or cars.
Failure to comply with student loan payment schedules can easily wreak havoc on your credit rating. Like any debt, not paying on time or missing payments can lower your credit score and subject you to fines or fees. Additionally, although loans for students are considered good, they don’t equally benefit all. If you take out loans and don’t finish your college education, you may not have increased your earning potential. Some fields of study notoriously don’t have high paying jobs when you do finish school.
If you earn your teaching credential, for instance, you may have a difficult time managing high payments for large loans on a relatively small starting salary. It makes sense to evaluate the earning potential of the field you plan to enter, and use this information to make prudent decisions about loans. When other sources of funding are not available to you, you may also want to consider choosing colleges that cost less so that your total amount owed when you finish college is not prohibitively expensive.
One significant difference between student loans and other types of good debt is that you’re not investing in something you can return. If you take out a mortgage on a house, or you fund a business, you may be able to repay the loan by selling the house or the business. You can’t sell your college education, and barring a few circumstances like permanent and total disability, you cannot escape paying student loans.
Declaring bankruptcy will not clear most student loans, as it might with business loans or mortgages. Essentially you are stuck with this debt, which though it may be considered good, can also be very bad when you’re not making enough to repay it. Many loans do have options to defer repayment, but these are of short duration and it usually means you acquire interest while the loan is being deferred. Furthermore, if you default on any of your loans and plan to go back to college, don’t expect to be able to get more loans. You have to maintain a consistent payment schedule, repay anything you may owe in back payments, and clear up the default before you get more student loans to continue or finish a college education.
There are some that argue that any debt is bad debt since you have to pay it off. If you apply for other loans when you already have large student loans, potential creditors will still weigh your debt to income ratio to see if you can really afford to make payments on another loan. When you have several tens of thousands of dollars in student loans, even though this debt is considered “good,” it may still affect your ability to purchase other things with credit, like homes or cars.
Failure to comply with student loan payment schedules can easily wreak havoc on your credit rating. Like any debt, not paying on time or missing payments can lower your credit score and subject you to fines or fees. Additionally, although loans for students are considered good, they don’t equally benefit all. If you take out loans and don’t finish your college education, you may not have increased your earning potential. Some fields of study notoriously don’t have high paying jobs when you do finish school.
If you earn your teaching credential, for instance, you may have a difficult time managing high payments for large loans on a relatively small starting salary. It makes sense to evaluate the earning potential of the field you plan to enter, and use this information to make prudent decisions about loans. When other sources of funding are not available to you, you may also want to consider choosing colleges that cost less so that your total amount owed when you finish college is not prohibitively expensive.
One significant difference between student loans and other types of good debt is that you’re not investing in something you can return. If you take out a mortgage on a house, or you fund a business, you may be able to repay the loan by selling the house or the business. You can’t sell your college education, and barring a few circumstances like permanent and total disability, you cannot escape paying student loans.
Declaring bankruptcy will not clear most student loans, as it might with business loans or mortgages. Essentially you are stuck with this debt, which though it may be considered good, can also be very bad when you’re not making enough to repay it. Many loans do have options to defer repayment, but these are of short duration and it usually means you acquire interest while the loan is being deferred. Furthermore, if you default on any of your loans and plan to go back to college, don’t expect to be able to get more loans. You have to maintain a consistent payment schedule, repay anything you may owe in back payments, and clear up the default before you get more student loans to continue or finish a college education.
An education loan
An education loan is a loan taken to help pay for an education, usually at a college or trade school, but may also be used to pay for private schools or prep schools as well. The education loan is available in several different types.
These are student loans, parent loans and private loans. Loans are also either guaranteed or unguaranteed. Student and parent loans are most likely to be guaranteed by the government, though many agencies work for the government in this respect. Unguaranteed or unsubsidized loans are usually from private lenders only, and usually can only be obtained if one has a good credit score or significant equity.
The student loan is usually the best choice education loan for a student whose parents cannot pay for his or her education. While the student remains in school, interest on this type of education loan accrues and is paid for by the government. When the student stops attending school, the education loan is usually paid off in payments. These payments can be quite large if the loan is large, so students should borrow only what they need.
A parent education loan is a good choice for parents who don’t want their children to end their college career in debt. These can also be guaranteed, meaning that parents don’t necessarily have to have great credit scores to get a loan. Unlike the student loan, parents usually begin payments on this education loan right away. Interest rates tend to be relatively low, but a longer repayment schedule means paying quite a bit of interest.
The private education loan almost always requires good credit. Many people use the equity in their house to take out such a loan. Unlike the parent and student education loan, the private education loan is not usually need based. Often when students apply for financial aid, they are told they, or their parents, make too much money to qualify. In these cases, those who do not have the money upfront to pay school costs may use equity to obtain loans.
The federal government does not guarantee the private education loan, and payments usually begin on the loan right away. These loans usually have the highest interest rates, as well. If they are taken as part of refinancing a home, they may be more economical. Some adults who work and re-enter school also find themselves needing to take out a private education loan, since they cannot qualify for any other type of loan. Most have to remain working, at least part time, in order to make payments.
Because students frequently leave college heavily burdened with debt, it is important to consider how much of a loan one really needs. The less debt contracted, the better. Before applying for an education loan, evaluate the other types of aid that may be available. There are numerous scholarships that go unclaimed each year because no one applies for them. Research into scholarships that are not need-based can often help defer some college expenses, lessening the amount one needs to borrow.
These are student loans, parent loans and private loans. Loans are also either guaranteed or unguaranteed. Student and parent loans are most likely to be guaranteed by the government, though many agencies work for the government in this respect. Unguaranteed or unsubsidized loans are usually from private lenders only, and usually can only be obtained if one has a good credit score or significant equity.
The student loan is usually the best choice education loan for a student whose parents cannot pay for his or her education. While the student remains in school, interest on this type of education loan accrues and is paid for by the government. When the student stops attending school, the education loan is usually paid off in payments. These payments can be quite large if the loan is large, so students should borrow only what they need.
A parent education loan is a good choice for parents who don’t want their children to end their college career in debt. These can also be guaranteed, meaning that parents don’t necessarily have to have great credit scores to get a loan. Unlike the student loan, parents usually begin payments on this education loan right away. Interest rates tend to be relatively low, but a longer repayment schedule means paying quite a bit of interest.
The private education loan almost always requires good credit. Many people use the equity in their house to take out such a loan. Unlike the parent and student education loan, the private education loan is not usually need based. Often when students apply for financial aid, they are told they, or their parents, make too much money to qualify. In these cases, those who do not have the money upfront to pay school costs may use equity to obtain loans.
The federal government does not guarantee the private education loan, and payments usually begin on the loan right away. These loans usually have the highest interest rates, as well. If they are taken as part of refinancing a home, they may be more economical. Some adults who work and re-enter school also find themselves needing to take out a private education loan, since they cannot qualify for any other type of loan. Most have to remain working, at least part time, in order to make payments.
Because students frequently leave college heavily burdened with debt, it is important to consider how much of a loan one really needs. The less debt contracted, the better. Before applying for an education loan, evaluate the other types of aid that may be available. There are numerous scholarships that go unclaimed each year because no one applies for them. Research into scholarships that are not need-based can often help defer some college expenses, lessening the amount one needs to borrow.
Subscribe to:
Posts (Atom)
