A Good Student Loan vs. a Bad Student Loan

Considering the total student loan debt reaching $1 trillion, and surpassing total credit card loan and auto loan debt, a lot of people of are becoming concerned of the drastic increase in college financing. Any loan is considered as bad loan right away and students who get these kinds of loans will almost immediately be living poor lives because of excessive interest rates. However, this perspective is not entirely true.

It might be considered unreasonable to borrow large amounts of money with high interest rates to finance a career that will not bring you much income. On the other hand, it is better to get a loan to fund your college education because it is an asset and a good investment as well. However, good and bad loans may differ from one family to another, so here are examples of a good and a bad loan.

Federal Stafford loans can be considered a good loan because it is believed to be one of the top student loans available as of this moment. For this kind of loan, your income must be low enough that you are not eligible for a subsidized loan. As a result, you will have an interest rate of 3.4 percent and the Federal government will be responsible for this interest rate until after your graduation.

But, the 3.4 percent interest rate is arranged to increase to a maximum of 6.8 percent on July 1 for the academic year 2012-2013. Fortunately, since the current US President Obama and the Congress is dealing with election once again, that increase is not possible to happen. In contrast, Stafford loans that are not subsidized by the government have an interest rate of 6.8 percent by now.

On the other hand, borrowing huge amounts of money to fund an overpriced school can be considered a bad loan. Although some might think that getting loans is worth it if you use it to finance college education in Harvard or Stanford, for instance, you will eventually face debt of roughly $60,000 or $80,000 after graduation.

How to Get a Loan with Poor Credit

The majority of the public have a time in their lives that they had poor credit and those who already experienced this are aware that it is never easy to have no access to credit. Those with poor credit can still loan money but they will be charged higher interest rates because they are a risk to the lender.

However, if they manage their credit well, then their credit scores will improve. Here are some tips for those with poor credit on how to get a loan and improve their credit rating.

First, consider getting payday loans, which are short-term loans that are created according to your capacity to pay off the loan. When getting a payday loan, your credit report is not checked. Moreover, a payday loan does not have an effect on your credit score, except when you do not completely pay off the loan.

A payday loan is ideal when cash is needed immediately for unforeseen happenings. You need a regular source of income and checking account as well.

Second, seek the help of a broker, especially when you are planning to apply for a mortgage or home improvement loan and you have poor credit. There are some brokers who have a certain connection with several lenders and banks, so they can assist borrowers with either good or poor credit history in getting loans appropriate to their needs. In addition, brokers are able to offer assistance to those people with poor credit since they know the credit terms of a lot of lenders.

Third, consider a cosigner, especially someone who has good credit, for instance, a family member, a friend, or an acquaintance. If you fail to pay the loan, the cosigner has the responsibility to pay your loan instead. Also, once you become a borrower with a cosigner, and pay the loan on time, then your credit score will improve.

Smart Financial Tips for Students

Going to college does not only give you the responsibility to look after yourself, it also means taking responsibility for your own actions. When you step into the university, you have to be very wise with your financial matters; this is because unlike your previous days in middle school and high school, your parents will not be around to manage your money for you.

For those who have no clue on the matter, then it would be wise to read on, for here are tips on how to be wise a spender and vigilant in your financial status. Learn to say “no” and say “I have no money for that.”

Aside from learning how to avoid unnecessary spending, it is also wise to learn how to create a budget. Learning how to handle your money and knowing where you spend it will allow you to better control your financials and this will avoid you from being broke and penny-less.

Most college students tend to finish off their allowances in the first semester of their schooling. Swiping away your credit card or your debit card to pay for your bills may be easy, but it is difficult to keep track of your spending that way. You can create a draft or keep a booklet recording your fees, or you can check your ledger online.

Keep in mind that spending weekly fees that amount to $75 dollars may not seem so expensive, however it totals to more than $2,700 in a year. Be smart and resourceful; take advantage of free campus dormitory facilities and entertainment mediums. Learn to discipline yourself now, and it will be most beneficial to you in the future.

Always have spare cash.Do you know what a contingency fund is? It is money intended to be spent on emergencies or unforeseen calamities. Have an amount of cash that you will not spend unless you really have to. This will make well prepared and let you keep a peace of mind.

You also have to adapt to a new type of lifestyle. Parties and other habits may tend to hover like an addiction in college. You might find yourself throwing away money so quickly over useless stuff. If overspending and asking your parents for money is what you have always done in high school, then maybe you have to change and sacrifice your social life a little bit when you step into college.

Final words of wisdom for students, never lend money to your friends. Usually, these borrowings are not formal and it is very difficult to ask for your money when you desperately need it back. Also, lending money to your friend may be doing more harm for him than good.

Bad Credit Doesn’t Really Reflect a Client’s Responsibility

Credit reporting industries believe that an individual’s credit status reveals his personality, most especially his sense of responsibility. However, the New York Times and the Columbus Dispatch, two renowned newspapers are arguing otherwise.

Recently, New York Times studied how destructive medical bills are to people’s credits. Columbus Dispatch on the other hand, has been focusing their time in investigating how frequent credit errors occur on reports and how difficult it is to have them corrected.

In fact after a year of intense investigation, the team gathered and analyzed about 30,000 of the complaints that consumers filed in the Federal Trade Commission office. Many lawyers in 24 different states held cases against credit unions for their breach in the Fair Reporting Act. Among these credit unions in the United States are the Equifax, Experian and TransUnion.

According to reports from observers, the study that the Columbus Dispatch conducted on the protests against credit-reporting companies was the most inclusive one ever done.

Some of the errors that were documented include errors on personal information such as birth dates, names, and age. In fact, most of the complaints include mistakes in the customer’s transactions in car mortgages, credit card loans, and approved bank sales for foreclosures, paid-off automobile loans that were mistakenly recorded as repossessed and paid-off credit cards that were reported as delinquent.

The sad thing is, even if many of this information are just minor errors, credit unions seem to be powerless in changing them. This makes it very difficult for clients to have their records fixed.

However, not only errors in records can cause bad credit for customers. Medical necessities also play a vital role in the area. According to the New York Times, since most of the earnings of medical producers come from patients, many hospitals and doctors are billing debts to clients, and these debts can be overwhelming.

According to FICO, it isn’t surprising for someone with a spotless credit to fall into bad credit since medical-related debts and collections from credit agencies have equally damaging effects on a person’s credit standing.

But this can be remedied with a good policy for medical related appointments. New York Times suggest that an act for Medical Debt Responsibility and the Affordable Care Act could help in the financial needs of Americans.

Credit Scores Continue to Improve in The United States

The recession that hit the United States on 2008 has placed borrowers and lenders alike in a bad place. Credit scores suffered, and worse, it was difficult to get a loan when your credit falls in the range of 700 to 749.

In a recent study by FICO Labs, it was revealed that most customers have FICO scores that range between 800 and 850. It represents about 18.3 percent of the total population.

The great news does not stop there, it was also reported that the number of customers that are recovering from bad credit has increased too.

The CEO of the Quizzle based on Detroit, Todd Albery concludes that the economy is recovering from the recession based on the latest findings of the study. Credit card owners are now wiser spenders, they no longer just swipe away their purchases, and they also work hard to pay their bills on time.

Many companies have also recovered and the number of unemployed people has decreased. Therefore, more people are capable of paying their bills and recovering from bankruptcy and bad credit.

Now, more than half of the whole American population has fair credit ratings with their FICO scores ranging from 700 to 850. The ratio of customers that have scores between 700 and 749 now represents the lowest point of the survey, only representing 15.5 percent of the population since April of this year.

Moreover, only 20 percent of the respondents of the survey expect to have delinquencies in their automobile loans compared to the 33 percent in the previous quarter.

The survey also found out that 28 percent of its respondents compared to the 39 percent of the last survey expected law-breaking on small-business loans.

The breaches on credit card terms and regulations have also decreased in this quarter and more citizens are making sure that they qualify for loans.This is definitely great news for the country.