Post about "Loans"

Using a Private Loan to Pay For College

Only after maximizing and using all available not private funding resources should you consider taking on a private loan to pay for college.To start with you’ll need to be conservative and be sure to only borrow what you an absolutely afford. As with any loan, it is not just an investment but often a long term commitment. Ask a financial aid advisor about what kinds of private financial aid is available to you.To qualify for a private loan you’ll need to go through a full application process but before doing that I suggest you pre-qualify to see if you are eligible for the actual loan. This will eliminate any uncertainty right at the beginning so you don’t waste valuable time. You’ll discover the amount you can get and leave you feeling stress free and available to locate further alternative funding if the approved amount won’t cover 100% of your anticipated or known expenses.Various loans are available but the main list includes these options:Signature Student Loans
Tuition Answer Loan
Signature Student Loan for Community Colleges
Continuing Education Loan
Career Training LoanLet’s now take a closer look at each loan:Signature Student LoansApply for if grants, scholarships and Federal Stafford loans haven’t completely covered your total educational costs. To be eligible you must be at least half way towards a 4-5 year degree or attend a community college where you are working towards your degree. You also need to have maintained a respectable credit rating.Many students do get approved. If your credit worthiness isn’t exactly the most desirable then you could co-sign affording you a lower interest rate too. If your school vouches for your educational costs then a signature student loan can be increased according to your financial requirements.You won’t need to make repayments while you are still studying. This kind of loan is also available to international students with an eligible co-signer.You may repay over 15 years or longer (usually at a 0% interest rate) and loan limits vary according to college and discipline: community colleges: $50,000; 4-5 year colleges: $100,000 – $220,000 including all private student loan debt.Tuition Answer LoanThis loan allows credit worthy parents and students (undergraduate and postgraduate) to borrow from $1,500 to $40,000 to cover up to total college costs.To be eligible you must have a social security number, be a US citizen and have good credit. You must also prove you are enrolled in a college with an official document i.e. tuition bill, class schedule printout.If you are successful in applying for a Tuition Answer Loan then the checks will come to you, not to the school where you study. Collateral is not required for this loan and repayment options are flexible and can be deferred until after graduation. Repayment options vary but you must start repayments of the interest and/or the actual loan amount at least beginning at the half-way point through your course of study. Deferment must end after either 4.5 years or 6 months after graduation, but the later you leave it the higher the interest rate will be. The initial amount you borrow will determine your costs later on to a large extent.A one-time fee is charged for this loan which is added to the loan amount at disbursement. The interest rate is Prime Rate and adjusted monthly and is calculated too according to your credit history and that of a cosigner if there is one. You will receive a 0.5 percentage point interest rate reduction after 24 on-time consecutive payments have been made.It is recommended you apply for this loan with a cosigner to meet often strict credit requirements. It is wise to read the small print carefully so that you know what kind of agreement you are truly entering into.Signature Student Loan for Community CollegesCreated especially for community college students, this loan is the most popular after-Stafford loan.This loan is similar to the Signature Student Loan described above. Please reread the above to gain more clarity.Loan amounts range from $500 to $50,000 aggregated. Interest rates are variable and based on Prime Rates. Depending on your credit history, repayment rates are 0% – 3%. You can repay your loan in full at any time without penalty.Continuing Education LoanDesigned especially to suit postsecondary students not seeking degrees and part-time degree seeking students, this loan requires you be a US citizen and have a good, established credit history.There is no maximum loan limit on a Continuing Education Loan.The continuing education loan rewards good credit history with better interest rates and lower fees. You can repay over 15 years at the most. If you have a bad credit history, apply with a co-signer. There is no prepayment penalty and you may use your loan for tuition and other educationally related expenses.Loan fees range from 0% – 6.5% With three types of repayment, this type of loan is flexible. With the standard repayment option (principal and interest), minimum monthly repayment is $30. With the interest-only repayment, you can repay only interest while in school and then the full loan amount in installments once you have graduated. You can defer payment too, as a third option, and pay a $10 deferment payment for each month that you want to defer payment, useful if money is tight during those long student days and nights.Once again it is wise to read the small print before sending your application for this loan.Career Training LoanSpecializing in training school, technical training or trade school, this loan is for continuing education programs. You must be a US citizen and have a good credit history. Interest rates and fees are reduced for those applicants with good credit ratings. Apply with a co-signer if you feel you can’t meet the high expectations required to successful approval.Once again there is no upper limit to the amount you can borrow. Loan fees range from 0% – 6.5%. For repayment options, see the Continuing Education Loan section above. You can pay the interest only while still studying, pay the full loan while studying or defer for up to 12 months paying a $10 fee at the end of each month of defermentConclusionFor all borrowing a good credit score is essential to lower your repayment costs. If you don’t have the best credit rating, apply with a co-signer who does have a good credit rating. Private student loans are a final option after successful grant and scholarship applications have run dry. Be careful how much you borrow. You will obviously need to pay it back plus interest!Good luck!

Explaining the Advantages of HDB Loans Versus Bank Loans (An Abridged Version)

Before 1 January 2003, people buying a HDB (Housing Development Board) flat have to finance it either with a HDB Concessionary Rate Loan or a HDB market rate loan. But since then the HDB market rate loan was replaced by home mortgage from financing institutions, which are gazetted by the Monetary Authority of Singapore.HDB Concessionary Rate LoanCompared to a home loan from a financing institution, a HDB loan has more stringent eligibility requirements. The below covers most of them.Eligibility Criteria:For HDB flats only (resale or direct purchase from HDB)
At least one buyer must be a Singapore citizen
Must have a gross monthly income not exceeding $10,000 (or $15,000 for extended families)
For DBSS flat the income ceiling is $8,000 (or $10,000 for extended families)
For applicants under the Single Singapore Citizen (SSC) scheme, the income ceiling is $5,000
Must not own any private residence (in Singapore or abroad), including HUDC and executive condominium
Must not have sold a private residential property within 30 months and taken a HDB loan before
Must not have previously obtained a HDB loan within 30 months
Must not have taken more than two previous HDB loans
Must not own more any market / hawker stalls or commercial / industrial property (Except if you operate the business yourself, have no other source of income, and only own one market / hawker stall or commercial / industrial property)From July 2013, HDB loan will not be granted for flats with less than 20 years of lease. In addition, for flats with lease between 20 and 59 years, loan approval and tenure will be subjected to certain conditions.Given the many restrictions of a HDB loan, why then do Singaporeans still want to take one? We delve further into the pros of this loan in the following sections.1. Higher CPF (Central Provident Fund) withdrawal limitFor financing by bank loans, the CPF Ordinary Account withdrawal cap is up to 100% of the valuation limit (VL), which is the lower of the purchase price or valuation at the time of purchase. If the loan is still outstanding when this limit is breached, the housing withdrawal limit can be increased to 120% VL provided that half (entire) of the prevailing Minimum Sum is set aside for borrowers below 55 (55 and above). This housing withdrawal limit varies with the purchase date of the flat, for purchases from 2008 onwards it is 120%.With a HDB concessionary loan, however, you can enjoy a higher withdrawal limit.For direct purchase from HDB, there is no limit to the saving in the Ordinary Account you can use.For resale HDB flats, there is no limit to the saving in the Ordinary Account you can use, after you have set aside half of the prevailing Minimum Sum.But from July 2013 onwards, for flats with leases between 30 and 59 years the use of CPF fund is allowed only if the remaining lease covers the buyer till at least 80. For such flats, the withdrawal limit will be computed based on the below formula:Withdrawal Limit= (The remaining lease of flat or property when the youngest owner is 55 years old / The lease of the flat or property at the point of purchase) x VLFor example, at the point of purchase the buyer is 38 years old and the lease is 40 years. When the buyer turns 55, the remaining lease will be 23 years. HenceWithdrawal Limit = 23/ 40 x VLTable 1 further illustrates what is VL.Table 1: VLFlat APurchase Price (S$) = 400,000Valuation (S$) = 350,000VL (S$) = 350,000Flat BPurchase Price (S$) = 370,000Valuation (S$) = 420,000VL (S$) = 370,000For flats with under 30 years of lease, use of CPF fund is prohibited. In other words, buyers will to cough up cash for the down-payment, monthly repayment of the loan, stamp duties and other miscellaneous fees.2. No cash component required for the down-paymentA key advantage of a HDB loan is that you do not have to stump up any portion of the down-payment in cash. You are allowed to use the balance in your CPF (Central Provident Fund) Ordinary Account to pay for it completely.Whereas with a bank loan, you will have to pay at least 5% of the Valuation Limit (VL) in cash. If the loan tenure exceeds 30 years or extends past the age of 65, the minimum amount jumps to 10%.3. Higher loan quantumFor the first HDB Concessionary Rate Loan you are taking, the loan quantum is as high as 90% VL. In contrast, for bank loans, the quantum is capped at 80% LTV (loan-to-value ratio). It dips to 60% if the loan tenure exceeds 30 years or extends past age 65.New regulations, that have kicked in from 12 January 2013, dictate that the mortgage servicing ratio (MSR) for private loans must not exceed 30% of the gross monthly income of the borrower and 35% for HDB loans.Effectively, this can translate into a lower loan quantum for a bank loan compared to a HDB loan.For example, for a 30-year loan with a 80% quantum for a S$800,000 HDB flat, at an interest rate of 1.5% p.a., the monthly repayment amount will be S$1,932.67. In order to be eligible for aHDB loan: Gross monthly income ≥ S$5,521.92
Private loan: Gross monthly income ≥ S$6,442.24Thus, if your income is below S$6,442.24, you will not be eligible for a private loan of 80% LTV. If you extend the loan tenure, current rules mandate that you can only take up to 60% LTV.Therefore, a HDB loan will allow a higher loan quantum.4. HDB is more lenient As a Government agency which main goals are to provide affordable quality housing and encourage home-ownership, HDB tends to be more tolerant of delinquent borrowers.But for a loan from a financing institution, you are always required to pay the monthly stipulated amount even if you have suffered a pay cut.Further, HDB usually grants deferment of monthly installment payment if you have fallen into financial hardship. The banks, on the other hand, will likely be hot on your heels if you defer payment even for a day!5. No penalty for partial or full repayment of loanOf note, is that HDB imposes zero penalty for partial or full repayment of its loan.Most mortgages of financial institutions, however, come with a lock-in period (aka commitment period) typically of 3-5 years. During this period, any repayment above the prior agreed amount will result in a penalty – usually at most 1.5% of the repayment amount. Financial institutions profit from the interest incurred on the loan, any partial or full repayment of the loan means a loss on interest earnings. Hence, the penalty helps to compensate for this loss.6. Stability in interest rateSince revision to the interest rate of a HDB loan is made quarterly in tandem with changes to the CPF rate, which has been the same for over 10 years. The interest rate has, likewise, remained stagnant. A HDB loan, thus, offers relatively more stability than even a fixed-rate mortgage which rate is only fixed for 3- 5 years. This is not saying that there have been no fluctuations in HDB interest rates. For instance, in the 1990s rates demonstrated more volatility.