How does people get into huge debt? Did you ever know about that or you just never want to think about that?
Lot of people misunderstand and misuse credit cards. Many of them live to the limit of their paychecks. Some use their credit card as if it were an increase in salary rather than an increase in debt. Many actually believe that credit gives them extra spending money.
The main cause of families to go into credit card debt is the fact that it is built on impulse-they fritter their money away. Many Americans love to shop when they’re bored, nervous, or anxious. A day at the mall can relieve the tensions of everyday life. Shopping offers hours of escape, a chance to forget our problems and treat ourselves. That’s when “impulse shopping” occurs. We might head to the mall to buy a pair of sneakers, but once there, our eyes start to wander. On impulse, we suddenly pick up things we would never buy if we had to pay for them with cash.
Impulse also causes us to be overly generous when buying birthday or Christmas gifts, to grab the tab in restaurants, to buy expensive status brands, or to buy more than what we need so we won’t feel silly charging a small amount. Impulse shopping causes us to dig ourselves into debt. In other words, at the end of the month, we really don’t know where our money went.
Impulse shopping is very common. The next time you head off to the mall, see how many out of these truths apply to you:
* More than half the things we buy are impulse purchases, bought on the spur of the moment.
* Impulse shopping causes us to spend nearly three times more money than we had originally planned to spend.
* Half the impulse items bought are unnecessary and often go unused.
* Impulse items are seldom compared for cost or quality.
There are quite a lot people, who can’t control this impulse, shopping has become as addictive as gambling or overeating. For them, shopping has become the number one over-the-counter remedy for life’s aches, pains, and disappointments. Most compulsive shoppers suffer from low self-esteem; they have problems in life that make them feel powerless and unimportant. Shopping helps restore their sense of self-worth and gives them a temporary feeling of being in control. A lot of compulsive shoppers come from abusive, alcoholic, or broken homes. What’s surprising is that compulsive shoppers are intelligent, ambitious, and very optimistic about the future.
The next major contributor for huge debt is the interest charges. What people must understand is that the interest is charged each month on the unpaid balance and not the amount you send in. Most credit cards charge an annual interest rate of 18 percent, which works out to about 1.5 percent monthly.
These two factors combined together cause a surge in debt. Unless managed in a right way, one could get into deep trouble.
Ps: Did you agree with that?
Showing posts with label student debt. Show all posts
Showing posts with label student debt. Show all posts
Thursday, October 23, 2008
Tuesday, September 16, 2008
What is LowDown?
Student loans are a wonderful way to pay for graduate school. They are relatively easy to qualify for as long as you are not delinquent on any previous student loans. Usually there is no credit check, you just need to give the names of a few references which are only contacted in your lender is unable to reach you. A great option for paying for graduate school, student loans have easy qualifications except for delinquents on previous student loans. Usually no credit check occurs and only the names of a few references to be contacted in case of the lender's failure to contact you, is required.
It's surprising that half of one's student loans are subsidized. In subsidized student loans, interest is paid by the federal government and not by the borrower. Very low income is not necessary to qualify for subsidized loans as it takes income and family size into consideration with many individuals in families qualifying for one subsidized loan or the other.
Student loans make it possible for many to attend school. Often money can be taken out to pay for other expenses other than tuition, like a new computer, books and supplies and living expenses. Graduate students sometimes quit full-time jobs or opt for part-time hours to attend school. Personal loans help cover necessary living expenses. Most personal loans however, require credit check unlike traditional student loans.
Millions of students benefit from student loans without which school would be unaffordable. But certain factors need to be remembered before signing the paperwork. Applying and getting approval for student loans will make it appear as debt on credit report, even if indicates one is not in repayment status. It can nevertheless affect credit score adversely. For example currently the money one makes may not be sufficient to pay the monthly-anticipated payment on the loan after graduation. The credit score will then reflect too much debt compared to current income. For the credit agencies the fact that one is currently in school and after graduation will be likely to earn more and have no more problems with repayment of loan, is not considered. It can affect the ability to apply for any other loan while still in school.
Sallie Mae Servicing lists out several serious implications on delinquency on student loans:
--Default can be reported to all national credit bureaus making it likely to affect financing of any future purchase like a home or automobile.
--The cost of the loan can increase with late fees and other charges.
--Entitlements may be lost for deferment or forbearance options.
--Many repayment options can be lost like income sensitive or graduated repayment.
--Eligibility for future student financial aid may be lost.
--Wages can be garnished.
--IRS refunds can be seized by the Department of Education.
--One can be sued for the balance on the loan.
(Source: http://www.salliemae.com/)
Therefore first one should be aware that student loans don't just disappear unless they are repaid. Fortunately the options are many. One is to stop attending due to a break in education or on graduation, to start a grace period. Six months follow before the estimated first payment is scheduled to start. In the grace period the interest rate is lower than during the repayment period. The grace period gives you a chance to find a job to begin payments for student loans.
Most students have more than one student loan, with usually one for each school year. If you qualify for subsidized student loans, the government pays the interest on the subsidized student loans. One could have half of his loans subsidized and the other half, not. Consolidating student loans can enable you to save yourself the efforts in separate payments for each loan and money as your loans are all combined into one. Consolidation during the grace period saves you substantial amount. For loans amounting to over $40,000, your payments can stretch to over 30 years.
Several other repayment options can be found by going to http://www.salliemae.com/. The best advice one can get is to research options thoroughly for the payment plan that would work best for you.
PS: I guess, its another good information. Why not you give a try first??
It's surprising that half of one's student loans are subsidized. In subsidized student loans, interest is paid by the federal government and not by the borrower. Very low income is not necessary to qualify for subsidized loans as it takes income and family size into consideration with many individuals in families qualifying for one subsidized loan or the other.
Student loans make it possible for many to attend school. Often money can be taken out to pay for other expenses other than tuition, like a new computer, books and supplies and living expenses. Graduate students sometimes quit full-time jobs or opt for part-time hours to attend school. Personal loans help cover necessary living expenses. Most personal loans however, require credit check unlike traditional student loans.
Millions of students benefit from student loans without which school would be unaffordable. But certain factors need to be remembered before signing the paperwork. Applying and getting approval for student loans will make it appear as debt on credit report, even if indicates one is not in repayment status. It can nevertheless affect credit score adversely. For example currently the money one makes may not be sufficient to pay the monthly-anticipated payment on the loan after graduation. The credit score will then reflect too much debt compared to current income. For the credit agencies the fact that one is currently in school and after graduation will be likely to earn more and have no more problems with repayment of loan, is not considered. It can affect the ability to apply for any other loan while still in school.
Sallie Mae Servicing lists out several serious implications on delinquency on student loans:
--Default can be reported to all national credit bureaus making it likely to affect financing of any future purchase like a home or automobile.
--The cost of the loan can increase with late fees and other charges.
--Entitlements may be lost for deferment or forbearance options.
--Many repayment options can be lost like income sensitive or graduated repayment.
--Eligibility for future student financial aid may be lost.
--Wages can be garnished.
--IRS refunds can be seized by the Department of Education.
--One can be sued for the balance on the loan.
(Source: http://www.salliemae.com/)
Therefore first one should be aware that student loans don't just disappear unless they are repaid. Fortunately the options are many. One is to stop attending due to a break in education or on graduation, to start a grace period. Six months follow before the estimated first payment is scheduled to start. In the grace period the interest rate is lower than during the repayment period. The grace period gives you a chance to find a job to begin payments for student loans.
Most students have more than one student loan, with usually one for each school year. If you qualify for subsidized student loans, the government pays the interest on the subsidized student loans. One could have half of his loans subsidized and the other half, not. Consolidating student loans can enable you to save yourself the efforts in separate payments for each loan and money as your loans are all combined into one. Consolidation during the grace period saves you substantial amount. For loans amounting to over $40,000, your payments can stretch to over 30 years.
Several other repayment options can be found by going to http://www.salliemae.com/. The best advice one can get is to research options thoroughly for the payment plan that would work best for you.
PS: I guess, its another good information. Why not you give a try first??
Monday, September 15, 2008
Did you know 2 Ways to Reduce Debt Burden?
Eligibility for federal student loan consolidation
DId you know what is that mean?
You are eligible to consolidate federal student loans when:
# You are no longer enrolled in school (defined as being enrolled less than half time)
# You must be in the "grace period" of the loan or must be actively repaying your loan.
# Most consolidation companies require a minimum loan amount, $10,000 is typical.
The difference between federal and private student loans
Federal student loans have advantages over private loans. For example, interest on the loan is tax deductable, the loan can sometimes be forgiven for certain types of service, and you can sometimes defer payments on the federal loan if you go back to school.
Private loans don't have these advantages - they are really just loans either secured or unsecured, and you have to pay them back just like any other loan.
So, it's important to not consolidate federal and private loans together. Consolidate all your federal student loans first, then separately consolidate your private loans. If you were to mix the public and private loans you would have to take out a single private loan that loses all the benefits of the federal loans. Keep government student loan consolidation separate from private loan consolidation.
Student loan debt
About 50% of recent college graduates took out student loans, with an average borrowed around $10,000 (ref. 3). In the last three years, rates have fallen very low. As of fall 2003, Stafford loan interest rates were in 3-4% range (ref. 2). Consolidation interest rates can be much lower (under 2%), but this comes with very specific requirements - like good repayment history.
Like any debt, student loans can influence your credit and your future decisions. Students who borrowed a substantial amount for college (more than $5000) are less likely to pursue higher education (ref. 3). In addition, student loan debt that exceeds 8% of your income can be seen negatively when your credit gets assessed for future loans.
Two ways to reduce the debt burden are:
1) reduce or eliminate the principal balance. Specific types of loans can sometimes be forgiven by service or other higher education - look into the specific student loan program you have.
2) Reduce your monthly payment. Since debt burden is measured by comparing your loan payment to your income, reducing your payment helps your credit evaluation.
Ps: Ok. Did you understand now?
DId you know what is that mean?
You are eligible to consolidate federal student loans when:
# You are no longer enrolled in school (defined as being enrolled less than half time)
# You must be in the "grace period" of the loan or must be actively repaying your loan.
# Most consolidation companies require a minimum loan amount, $10,000 is typical.
The difference between federal and private student loans
Federal student loans have advantages over private loans. For example, interest on the loan is tax deductable, the loan can sometimes be forgiven for certain types of service, and you can sometimes defer payments on the federal loan if you go back to school.
Private loans don't have these advantages - they are really just loans either secured or unsecured, and you have to pay them back just like any other loan.
So, it's important to not consolidate federal and private loans together. Consolidate all your federal student loans first, then separately consolidate your private loans. If you were to mix the public and private loans you would have to take out a single private loan that loses all the benefits of the federal loans. Keep government student loan consolidation separate from private loan consolidation.
Student loan debt
About 50% of recent college graduates took out student loans, with an average borrowed around $10,000 (ref. 3). In the last three years, rates have fallen very low. As of fall 2003, Stafford loan interest rates were in 3-4% range (ref. 2). Consolidation interest rates can be much lower (under 2%), but this comes with very specific requirements - like good repayment history.
Like any debt, student loans can influence your credit and your future decisions. Students who borrowed a substantial amount for college (more than $5000) are less likely to pursue higher education (ref. 3). In addition, student loan debt that exceeds 8% of your income can be seen negatively when your credit gets assessed for future loans.
Two ways to reduce the debt burden are:
1) reduce or eliminate the principal balance. Specific types of loans can sometimes be forgiven by service or other higher education - look into the specific student loan program you have.
2) Reduce your monthly payment. Since debt burden is measured by comparing your loan payment to your income, reducing your payment helps your credit evaluation.
Ps: Ok. Did you understand now?
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