Loans Info

Private loans

2024-08-04T22:19:00.002+08:00

Private student loans are much costlier loans than those guaranteed by the federal government and borrowers don't enjoy the same protections as with federal student loans.

If you're among the minority of borrowers who have taken out private loans, and lenders send you offers to refinance your private loans, Asher's best advice: "Be even more careful (than you'd be with federal loan consolidation offers)." That's in part because the rates on these loans are based on your credit and can be as volatile as credit card rates.

The Definition of Personal Loan

2008-09-22T14:33:00.001+08:00

If you are like most ordinary people today, at some point in your life you will need
money that you just don’t have, for car repairs, medical bills, school supplies for your
children, etc. You can always rely on your credit cards, but who wants to pay those
extremely high interest rates and fees? There is a better option, referred to as a personal
loan. The money that you receive from a personal loan can be used to cover all kinds of
expenses, anyway you like, just keep in mind, that you do have to pay the money you
borrow back, plus interest. There are many places to obtain a personal loan from, local
banks and loan companies, as well as internet lenders. Personal loans can bail you out of
a fix, as long as you don’t borrow more than you can pay back, and you shop around for a
good rate and repayment plan.

The average person, with a full-time job and decent credit, can borrow as much as
$15,000 in the form of a personal loan. Don’t try to get the max you can, just get enough
to see you through, because again, you will have to make those monthly payments, and
the more you borrow, the higher those payments will be. Personal loans are different
from lines of credit often available to you through your bank. The money you take out
with a personal loan is given to you all at once, and you will not be able to get more until
you have paid off a significant portion of your debt. With lines of credit, you are given a
certain limit, and you can withdraw funds until you have reached that limit, pay the
balance down, and get more funds as needed.

Again, depending on your credit, the amount of money you need, and your income, your
personal loan may be either unsecured or secured. If your loan is unsecured, there is no
property listed as collateral, but you will likely have to pay a much higher interest rate,
due to the risk the lender is taking by giving you an unsecured loan. If you fail to pay the
money back, they have no property to take from you to go towards the remaining balance
that you owe, meaning that they will have to go through the legal process to get their
money. If you have a secured personal loan, some piece of property that you own, such as
your vehicle, land, home, etc., is listed as collateral, and if you default on the loan, the
lender has the legal right to claim that property as repayment.

Your repayment time varies from loan to loan, in some cases, you will be given up to five
years to payoff your debt entirely, and in others, you may only have a year. It depends on
the policies of your lender, and how much money they are lending to you. The longer you
stretch your repayment period out, the more you will be paying towards interest, so keep
that in mind. Don’t accept a loan with payments that you can’t afford to make just to get
lower interest, but don’t accept the longest term if you can afford otherwise. If you don’t
fully understand the personal loan process, you should take the time to look into it, before
you sign any paperwork, so you don’t end up in financial trouble.

Many people use the money obtained from personal loans to pay off high interest debts,
such as credit card bills. You can save money in this manner, and it will be much easier
for you to only have to worry about making one payment, rather than juggling several
payments and due dates. Just don’t make the mistake of taking a personal loan to get
yourself out of debt, and then turn around and amass even more debt, as this is how many
people end up with bad credit and in bankruptcy. You have to take control of yourself,
and resist the temptation to go into debt, payoff your cards and cut them up, and toss the
applications you get in the mail immediately into the shredder, so you aren’t tempted to
send them in. Credit cards are not a necessity, especially not now with so many prepaid
cards and debit cards available, which can be used to rent cars, make airline reservations,
etc.

Personal Loans-Secured or Unsecured

2008-09-22T14:32:00.001+08:00

Out of all the different types of loans available today, personal loans are the easiest to
obtain, right up there with credit cards. Even if you haven’t always made the best
decisions with your credit in the past, or have no credit whatsoever to this point, you can
still likely qualify for a personal loan. Basically, all you have to do is be able to prove
that you do have a job, and that your monthly pay is what you claim it is, and your
address. It doesn’t take very long to get an answer, and to have money in your hand,
money that can be used how you see fit, whether it be for debt consolidation, vacation,
etc. You decide what you do with the money; just remember that you have to pay it all
back to the lender, plus interest.

When you start thinking about personal loans, you will have to decide whether you want
an unsecured or secured loan. With unsecured loans, you don’t have any collateral at risk,
but you will be required to pay higher interest rates, and you may not be able to borrow
as much money as you could with a secured loan. If you have an asset in your name that
you can list for collateral, a secured loan might be the best option, as it will usually give
you a much lower interest rate, and more money available to you. If you don’t have any
credit established, or have past credit problems, you may be required to take a secured
personal loan or nothing at all. This often happens to people who don’t have a lot of
income, or a lot of time on their present job as well.

For someone who doesn’t have any credit thus far, a secured personal loan can go a long
way towards getting your credit established. Usually your payments are pretty low, but
you may have a high interest rate. In this case, don’t borrow more money than you
absolutely have to have, and pay it back as quickly as you can, which will save you some
money in interest.

Before you ever start filling out applications, know how much money you need, and what
you need it for. Don’t fall for the hype, and take out a larger loan than you need just
because you can, as this could lead to potential trouble. Make certain that all of your
payments are paid in full by the required due date each month, and pay extra as often as
possible, to bring your balance down sooner. The better you handle this loan, the more
credit you will have available to you when you need it again. Whether you are looking to
build credit worthiness, or trying to rebuild from past mistakes, a secured personal loan is
a good option.

Obtaining a Personal Loan from an Online Lender

2008-09-22T14:31:00.001+08:00

Most of us nowadays do many of our daily tasks on the Internet. We shop, check our
account balances, make payments, send and receive mail, and make money all from the
privacy of our homes. Well, did you also know that you can apply for and obtain a
personal loan in this manner as well? Lenders realize that people like being able to do
things in this manner, so now they are offering you the chance to apply for and obtain a
personal loan online as well, without ever having to leave your home. Personal loans
come in handy for many things, unexpected expenses, paying off your bills, etc. Many
people even use personal loans to payoff their credit card debts, and save money, that is
up to you.

Applying for a personal loan online is fairly simple, you find a lender you think you
would like to do business with, fill out the required information, and wait for your
response. At one time, it could take days to know if you were approved, and to tidy up all
of the paperwork, but now, it can all be done in a matter of minutes with some lenders.
Don’t think that since you are applying for and accepting a personal loan online that you
aren’t required to pay it back, since you didn’t sign for anything. You will be prompted to
accept the terms of use before your application can be processed, and that serves as your
signature, so be careful here.

Since you are saying that you have read and agree to the terms of the loan, it is important
that you actually physically read the information contained here. If you don’t understand
it, or don’t agree to it, don’t proceed. We get used to clicking accept or agree, and often
do so without even looking at what we are accepting or agreeing to, which can lead to
trouble down the road. In this section, you will be informed of the terms of your personal
loan, and your legal rights and responsibilities, so don’t do anything until you have read
this completely, at least once.

There are many lenders online that are vying for your business, and it can be confusing
trying to decide who to choose. You should start first by determining how much money
you need to borrow, and what kind of terms you are looking for. Would you rather have a
short term personal loan, with higher monthly payments and lower interest rates, or
would you rather stretch it out as long as you can, with lower monthly payments? These
are things to consider before you ever begin the loan process. You should also do some
comparison shopping, getting quotes from several lenders, to try and get the best possible
deal on your personal loan.

Keep in mind that each time you apply for a personal loan with a different lender, a copy
of your credit report will be pulled. Too many credit pulls can impact your score, as it
often makes it appear that you are desperately seeking money, which could be a sign of
financial problems.

Once you have done your homework, which includes making sure you have a legitimate
lender, and not a scammer trying to get your personal information, then you are ready to
continue with the loan process. You should be prepared to spend some time reading and
filling out forms, and then making certain that everything you have submitted is correct.
Then, sit back and wait for the offers to come in. Choose the one that best suits your
needs, and you are done.

What Might Happen If You Don’t Make Your Personal Loan Payments

2008-09-22T14:28:00.000+08:00

It is very easy for the average person to get a personal loan to get them out of a bad
financial situation, but it isn’t always easy to make those required monthly payments on
time, no matter how good your intentions may be. Sure, when you got your loan, you had
every intention of making each and every payment in full and on time, but now that
something has happened, you have lost your job, or you have gotten married, etc., those
payments are getting harder and harder to come by. You need to pay your utility bills,
mortgage payments, credit card payments, student loan payments, car payments, and
insurance installments, and it is quite easy to put your personal loan on the back burner,
or to ignore it altogether when these situations occur. But, you would be surprised at the
legal remedies lenders have available to them when it comes to collecting the money that
you owe them.

First off, you should know that if money starts to get really tight, you should talk to your
personal loan lender, and all of your creditors, and let them know what is going on, how
long you expect the hardship to last, and what you are doing to rectify the situation. In
most instances, your creditors would much rather try to work out a more suitable
arrangement with you, than to try to go through the collections process, which costs them
time and money they don’t want to spend. You may even be allowed to sign a new loan
contract, allowing you to defer a few payments, or lower your minimum payment
amount, making it possible for you to stretch your budget farther. If you have over-
extended yourself, you may be able to refinance your loan, taking out enough money to
payoff some of the more bothersome debts you have, saving you money both now, and in
the long term in interest rates and fees, especially if your problem is with credit card
debts. There are many options available to you, even in financial hardship. That being
said talk with your creditors, don’t try to avoid them, and see what you might be able to
work out, in the end you will save a lot of money, and maybe your credit score as well.

Each lender follows their own collection guidelines, but is still bound by both state and
federal laws. If you have a secured personal loan debt, you should make every effort to
make your payments or a satisfactory arrangement, or be prepared to lose your collateral,
it is just that simple. That is why the collateral is there, so that if you don’t pay, the lender
doesn’t lose a lot of money to a bad debt.

Likewise, if you had to have someone co-sign for you on your personal loan, you should
know that if you don’t make the payments, you are not only ruining your own credit, but
theirs as well. The lender will not only come after you, but also the co-signer. They don’t
really care how they get their money, or from which party, as long as they get it. If your
co-signer can’t make the payments, and you refuse to handle the situation, then in all
likelihood, you both will end up being hauled into court, together. At the very least, you
can expect the account to be turned over to an outside office for collection, usually a not-
so-nice collection agency, that will put massive amounts of pressure on both parties until
payments are made, not only for the balance remaining, but any fees the lender feels like
assessing as well.

You will have to pay your own legal fees, and yes, even the poor soul who co-signed for
you, will also need legal representation. You will also be required to pay court costs,
which can be quite expensive as well. The actions of the court vary greatly, some will
require that you pay an obscene amount of money each month, or be placed into legal
custody, while others will garnish your wages, which will make it that much harder for
you to pay your other bills and living expenses. They will usually garnish or demand that
you pay at least twice the amount of your normal monthly payment every month, which
can put you in tremendous financial strain.

Some people make the mistake of thinking that if their personal loan is a secured loan,
that once the lender takes possession of the collateral, they are free from the debt, but that
rarely is the case. There will usually be a balance owing, meaning that collection efforts
will continue until the remaining balance is paid in full. So not only have you lost your
collateral, you are being hounded by collections agents for the remainder of the balance
on the loan. Again, this could end up in court, or with garnished wages, even on a small
balance.

There are some ways to keep all of this from happening to you, the most obvious being to
pay your monthly payments on time. When you do take out a personal loan, make certain
that you only borrow just enough money to see you through, and never borrow more than
you can comfortably repay. If you get extra money, such as income tax refunds, etc.,
think about putting it towards your personal loan balance, so that you can get your debt
paid down as quickly as possible. That way, if something unexpected does occur, such as
job loss, or illness, you won’t have as much outstanding debt to try and juggle.

Lenders don’t want to use the court system to get their money, due to the fees, and the
time involved. But, in the end, they will get their money, one way or the other, and you
should be very aware of that if you have personal loan debt.

Consolidate Student Loans and Shop Online

2008-05-09T13:35:00.001+08:00

by: Nick Smith

If you run a home business, you know that budgets can be pretty tight. Saving money wherever possible can be the difference between the business that succeeds and the one that fails. This article represents a broad survey of things you can do, from consolidating your student loans to getting small business deals on supplies, that will help you spend less each month.

Next Time You’re Online, Buy Something

Billions of dollars are spent each year online. Rather than suggest that you hurry and move your business online, I’d like to suggest that you add some of your dollars and cents to those billions already spent. Companies who move operations online reduce their overhead costs and often pass on those savings to you. Computers, airplane tickets, even student loan consolidation, can be purchased or arranged online. It has been my experience that I can find almost everything I want online for less than I can find it anywhere else. Next time you’re thinking about biting the bullet and making that big purchase, spend a little time shopping around online and see if you can’t save a few dollars.

Consolidate Student Loans and Get Your House in Order

Chances are good that you’ve been out of school for a while, but don’t skip this paragraph. If you consolidate student loans or other financial obligations, you will typically save a great deal of money each month on your monthly payments. Running a home business often blurs the line between personal expenses and business operating costs – do yourself a favor and make sure you have your personal financial affairs taken care of before you find yourself overwhelmed with past obligations. The government might not have cared about your credit score when they gave you those student loans, but banks looking to give business loans are a whole different story. Making sure everything is taken care will keep financial doors open that, once they’re closed, are very difficult to reopen.

Score One for the Little Guy

Believe it not, most people want small businesses to succeed. There are a lot of people willing to give you a break on prices because you own a home business, but you might need to ask about it. Office supply retailers and computer distributors sometimes offer discount prices to registered small business owners. The savings are not always monumental, but even the smallest savings multiplied over a year or two start to add up to pretty substantial amounts. Shop around to see if the suppliers you use are willing to offer you a discount on supplies or equipment.

Do Without…For a While

I’m probably not the only person that drove a car that was older than I was during college, or who ate Ramen noodles more than once almost everyday. Don’t forget the lessons you learned while you were a poor college student – the same ability to make do with what you have can save you a lot of money in the long run. I had just graduated from college and I wanted to get a new computer to replace the older, though fully functional one I was using. This was before I took my own advice to consolidate student loans, so money was still pretty tight. I wanted to kick myself when I saw that the price on the computer I bought dropped $300 in three months. Some expenses are necessary and unavoidable. For everything else, look to see if you can manage with what you have for a while longer.

Don’t Do It Alone

Nobody likes data entry – it’s time consuming, boring, and time consuming. If you find yourself spending too much of your day punching numbers into spreadsheets, consider hiring someone or outsourcing it to another company. If you think that you can’t afford the part-time salary, do an inventory of your time and see if what you would pay someone is worth the amount of time you’ll be able to invest into the meatier matters of your business.

I know I’m risking sounding like your father giving you a lecture about money, but remember that a penny saved is a penny earned. A successful business minimizes costs while maximizing profits.

Reverse Mortgage – Be Sure You Need It Before Applying For One

2008-05-09T13:05:00.001+08:00

Reverse mortgages used to be considered the last resort of desperate retirees who needed to borrow against their home equity in order to pay for medical expenses. With home prices across the country rising at astonishing rates, more and more retirees, aged 62 and over, are taking out reverse mortgages to fund better retirement living. A reverse mortgage works more or less the opposite way from a conventional mortgage; the borrower receives payments from the lender in the form of a lump sum, a line of credit, or monthly payments. The amount borrowed constitutes a lien against the home must be repaid upon the death of the borrower, or when the home is resold. There are costs associated with a reverse mortgage, however, and potential borrowers should be aware of these when considering taking out such a loan, particularly if the borrower takes out a line of credit.

All loans have fees associated with them. There are home appraisals, paperwork fees, mortgage insurance fees, and additional “points” added to the cost of the loan. In general, the costs of taking out a reverse mortgage are higher than those associated with a traditional mortgage. There are several reasons for this, including the fact that the time period for receiving repayment of the loan is indefinite, typically depending on how long the borrower lives. This uncertainty is added into the loan in the form of additional fees.

Most people who take out a reverse mortgage opt to take their funds in the form of a line of credit, rather than a lump sum or monthly payments. There are advantages to a line of credit, which allows the borrower to use the funds by simply writing checks against the loan. The primary advantage is that the borrower only uses the funds when he or she needs them. Because of this, interest only accrues on the money if the borrower actually writes checks. Borrowers should be aware, however, that the costs of the loan, which can be substantial, apply even if the borrower doesn’t write any checks against the loan. If the homeowner takes out a line of credit and decides to sell the home shortly thereafter without ever having written a check against the loan, the borrower will not owe the lender any interest or principal, but the borrower will lose the money paid for the cost of the loan, which is not refundable. If the borrower rolled the costs into the loan itself, they could owe payments even if they never wrote a check.

In short, borrowers considering taking out a reverse mortgage should make sure that they plan to stay in their home for quite some time and that they actually need the money from such a loan. A reverse mortgage is a great idea for those who have a specific purpose or use in mind, but as an emergency source of “rainy day” funds, it can be an expensive choice.

What is a Reverse Mortgage?

2008-05-09T13:03:00.001+08:00

Simply stated, a reverse mortgage is a loan that enables homeowners (age 62 and older) to convert part of the equity in their home into a tax-free income without having to sell the home, give up the title, or take on a new monthly mortgage payment. More and more homeowners are using this to supplement their retirement income, pay for health care, modify their home, or just get some cash for emergencies. Since this is a new product, some people have misconceptions of what a reverse mortgage is. The bank doesn’t give you money and take your house. Let’s look at some of the most common questions.

Are reverse mortgages for desperate people? No. It is an excellent financial planning tool used from people of all walks of life.

How do I qualify? You must be 62 or if both parties are on the mortgage, then you both must be at least 62. And, you must have equity in your home.

What if I still owe on my home? You may still qualify even if you have a balance on your first mortgage. The proceeds must be used to pay off the mortgage, first.

How much can I get? This depends on several factors such as, the age of your home, the value, your age at the time of closing, and interest rates.

Is it just monthly payments? No. You can get a lump sum, line of credit, monthly payments or a combination of monthly income and a line of credit.

But, won’t I have to pay taxes on these monthly payments to the government? No. The funds are tax-free. Its your money, not additional income.

Should I seek a lawyer or receive some counseling before I get a reverse mortgage. Yes. You must be counseled before receiving a reverse mortgage. You don’t have to talk to a lawyer or accountant, but it would be advised.

Who owns the title to my house? You still own the title.

What happens when I die? Once your home is passed on to your heirs, the mortgage becomes due. Your heirs may pay the mortgage and keep the home or sell the home and pay off the home. They may keep any excess sales proceeds.

What if I owe more than the house is worth? You can’t. Your repayment amount will never exceed the value of the home at the time the loan comes due. Also, there are no prepayment penalties.

What if I move? If you move, then the mortgage becomes due and must be repaid.

Home Equity Loan – A Reverse Mortgage Could Provide a Comfortable Retirement!

2008-05-09T12:52:00.001+08:00

While only comprising about 1% of all mortgages, the reverse mortgage has gained in popularity in recent years. Federally insured since the late 1980’s, the reverse mortgage allows owners of paid-off homes to borrow against the equity in their homes in the form of a lump sum, a line of credit, or in the form of monthly payments. The loan is repaid when the owners die or when the home is sold or no longer occupied.

In the early years of its existence, the reverse mortgage was regarded as a “last resort” step to avoid foreclosure, pay medical expenses or keep the home from disrepair. More recently, however, retirees have been finding creative ways to use the equity in their homes to allow their retirement years to be more enjoyable.

The huge growth of the housing market during the last five years has left millions of homeowners with large amounts of equity in their homes. Californians who bought homes in the early 1960’s at modest prices are now retiring; many of them have home equity in the mid-six figures. With that sort of equity, homeowners are using their equity to buy recreational vehicles, boats, luxury vacations, and even second homes. The structure of a reverse mortgage makes it possible for some homeowners to pay cash for a vacation home, while continuing to live in their primary residence for as long as they like, or are able. Once they die, the primary residence would be sold to pay pack the loan, while the second home would become part of their estate.

This has provided a rare opportunity for many couples, who struggled to raise families and pay mortgages during the working years, to enjoy a few luxuries in their retirement years. Couples who could never afford to travel can now dip into their home equity and see Europe or take that cruise that always eluded them.

While this may seem like a win-win situation for all involved, those in the lending industry express caution. For most people, the equity in their home is their single largest asset, and borrowing against it should done only after careful consideration. What if a lengthy hospital stay became necessary? Would the homeowner have sufficient funds to pay for that after buying a second home through a reverse mortgage? What if a husband or wife became incapacitated and required permanent housing in a nursing home? These are things that must be considered before using home equity for a houseboat or RV, and those considering such a move should consider discussing their plans with a financial advisor.

Despite the potential drawbacks, the use of the reverse mortgage to fund a fun and adventurous retirement seems to be growing. With interest rates still near all-time lows, the trend will almost certainly continue in the near future.

No More Federal Consolidation Loans

2008-04-25T13:29:00.001+08:00

There's a very simple reason why Sallie Mae, like other lenders, walked away from consolidation loans: They aren't very profitable. Typically, these loans command interest rates that are 75 basis points lower than the rates offered on Stafford and Plus loans, explains Kantrowitz.

"The joke in the industry is that the credit crisis took half of the profits [from the lenders]," says Kantrowitz. "And that Congress took the other half."

Introduced in the mid-1980s, consolidation loans were once a great way for borrowers to streamline outstanding federal student loans and reduce interest payments. Lenders didn't like these loans because they made less of a profit off of them, says Kantrowitz. And in early 2006, lenders further soured on loan consolidation. That year, the Deficit Reduction Act lowered borrowers' interest rates, thereby reducing the amount of money lenders could make off of these loans even more.

Last October, Congress struck again. It passed the College Cost Reduction and Access Act, which cut the interest rate that students pay on federal student loans while also reducing the subsidies that lenders were receiving for consolidation loans and increasing the fees they were paying to the government in order to sell consolidation loans. In short, consolidation loans became too expensive for lenders.

While Sallie Mae's decision to cease offering consolidation loans may seem like bad news for borrowers, it's actually not as grim as it appears. Consolidation had already become a bad ideaall federal loans have been disbursed with a fixed interest rate, thereby stripping away the most cost-saving feature of consolidation. In some cases, consolidation is now the more costly option for borrowers. for individuals holding onto federal student loans well before Sallie Mae's move. After all, the main incentive behind consolidation was to take your variable rate loans and combine them into one with a fixed rate. But since July 1, 2006,

Up until Friday, the advice for those still holding variable-rate student loans was to wait to consolidate until July 1 when they'd be able to lock in historically low interest rates. But with fewer lenders offering consolidation loans — including Sallie Mae, eight of the top 10 students lenders have stopped offering these loans — these borrowers "are going to have a very difficult time finding a lender that will be willing to" consolidate loans, says Brett Lief, president of the National Council of Higher Education Loan Programs. If you're stuck in this bind, consider consolidating your loans with the government.

Stafford loans

2008-04-25T13:16:00.000+08:00

If your Stafford loans were issued before July 1, 2006 they are variable-rate loans.

What determines the change in the variable rate every July is the yield on the 3-month Treasury bill during the last T-bill auction in May. Currently, the yield is very close to where it was a year ago. So if the 3-month yield doesn't move much between now and the end of the month, payments on your Stafford loans are not likely to go up much, if at all, after July 1.

So there's little reason to consolidate if your sole goal is to lock in a lower rate this year.

But there is one exception: if you're still in your so-called grace period, defined as up to six months after your graduation. That's because you still are enjoying the "in-school" rate, which is about 0.6 percentage points less than it will be when your grace period ends and you go into repayment. Consolidating before your grace period ends lets you to lock in that lower rate. Technically, you may lose out on some of your grace period because you will need to begin repayment within 60 days of consolidating. But if you apply for consolidation before July 1, a lot of lenders can set it up so that the clock on that 60 days doesn't start until close to the last two months of your grace period, Kantrowitz said.

There's also little reason to consolidate if you want to lock in a lower rate and you got your Stafford loan after July 1, 2006. That's because those loans are fixed rate loans at 6.8 percent and won't change.

Whether you have variable or fixed rate Staffords, however, you might consider consolidating if you want to reduce your monthly payments. You can do so by combining your loans into one loan and extending the repayment term. But by doing so you greatly increase the amount of interest you'll pay. By changing your repayment term from 10 years to 20, you'll cut your monthly payment by a third, but you'll double the amount of interest you pay long-term, Kantrowitz said.

A 30-year term is even more expensive. Say you have $20,000 in fixed-rate Stafford loans. Asher notes that you'll pay $7,619 in interest on them over 10 years. But if you consolidate and extend the repayment term to 30 years, you'll lower your monthly payment by $100 but you'll end up paying $26,935 in interest.

Besides rates and monthly payments, weigh discount incentives when considering consolidation. Many lenders offer breaks if, say, you direct debit your payments or pay on-time for 36 consecutive months. Compare not only consolidation discounts offered by different lenders, compare them to the discounts you're currently enjoying. Sometimes, Kantrowitz said, "discounts for consolidated loans are inferior to those on unconsolidated loans."

Student-Loan Consolidation

2008-04-25T13:09:00.001+08:00

IN YET ANOTHER signal that the credit crisis continues to take its toll, Sallie Mae, the nation's largest student-loan lender, said it will stop offering federal consolidation loans and cease paying loan-origination fees on Stafford loans.

The move echoes that of other top student-loan lenders who've been squeezed by both the credit crunch and a series of legislative moves that have left lenders to deal with shrinking profits.

Unfortunately, the situation is only expected to get worse. "If there's no government intervention and no thawing of the capital markets...there will be a mass exit of lenders from the student-loan programs," says Mark Kantrowitz, publisher of FinAid.org, an online source of student financial aid information. "Investor demand is much lower than the supply and that's causing a liquidity crisis in the student loan marketplace," he explains.

As a result, borrowers will have to pay the price. Former students who want to consolidate their loans can now only turn to the government and a small pool of lenders. Those heading to college are in an even more compromising position. Faced with the rising costs of college — the average cost of a four-year private college in 2007-08 was up by 5.9% from the previous year to $32,307; public college costs rose by 5.9% to $13,589 for in-state students and $24,044 for out of state students, a 5.4% increase, according to the College Board — and a string of lenders offering less financial support to incoming college students are faced with fewer options to help them afford college.

Student loan scandal: Effects on consolidation

2008-04-25T13:04:00.001+08:00

It's a good thing you got that college education. You can put it to good use navigating the complex maze that is the student loan industry as you consider whether to consolidate your federal student loans.

For those who have never done it, it's a question that comes up every year in anticipation of the rate change on July 1 of the variable federal student loans.

But this year, there's a twist. News of student lenders offering perks and kickbacks to colleges and alumni associations to include them on preferred lender lists have, understandably, made consumers wary.

But that actually may be one good thing to come out of the scandal. The advice about deciding whether and with whom to consolidate hasn't changed. It's just become even more relevant.

"The current scandal reinforces the need to be a savvy consumer and examine carefully any offer you receive no matter where it comes from," said Lauren Asher, associate director of Project Student Debt and the Institute for College Access and Success.

Indeed, said Mark Kantrowitz, publisher of FinAid.org, "even when a school's preferred lender list is unbiased, you still have to identify which loans are best for you."

The question of whether to consolidate your federal loans depends on the type of loans you have, their rate (variable or fixed) and your goal: Do you want to reduce the interest you pay long-term? Lower your monthly payment? Pay just one bill instead of several? Get better discounts?

It also depends on whether you've already consolidated the loans in question before. By law, you may not consolidate the same loans twice.