Loans Debts And Students
Aazdak Alisimo
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Posts by Aazdak Alisimo
Are Your Student Loans Wearing You Out?
Feb 18th
College is a wonderful experience. For many of us, it is the beginning of a life away from home. One thing that quickly catches our attention is the cost. Student loans are the obvious answer, but paying them back can be frightening when you see that balance and realize how long it is going to take.
Once you start repaying the loans, a question will quickly develop. Should you invest your extra money and pay the loans off in one fell swoop or are you better of throwing the extra money at the balance each month?
At this point in the article, you are probably smirking. Extra money. What extra money? The truth is you have it, but just do not recognize it. If you could set aside $5 a day, you would have $150 at the end of the month and $1,800 at the end of the year.
Most of us have government loans. Thank goodness. They come with relatively low interest rates. This means you can make a big dent by throwing extra money at them each month. Then again, investing the money might be the better solution.
The key is to look at the gain you can get with a conservative investment strategy versus the rate you will pay on your loans. If you are paying 5.5 percent on your student loans, but can get 15 percent through dividend payments from a company like Pengrowth Energy, you are better off investing.
Now, the answer is really not as obvious as it seems. There are two factors to consider. First is your ability to show enough discipline to not touch the money being invested. The second is a tax issue. Capital gains are taxed at 15 percent, so you need to figure that in to the equation.
A big factor in all of this is also your attitude. Are you aggressive and comfortable with investing? If not, you might want to take the approach of just paying down your loans directly. There is no right answer per se when it comes to your comfort level, so be honest with yourself.
Should you decide to skip the investment strategy, there is a particularly successful approach you can take to paying down your loans. It has worked time and again, so it should work for you as well. The key is to recognize you do not have one loan, you have many.
Your first step is to pick the smallest loan. After you make all your monthly payments, apply whatever extra cash you have to that small loan. Be disciplined. Since the loan is probably relatively small, you should be able to pay it off quickly, often in less than a year.
Once the loan is paid off, you will feel a sense of accomplishment. Yes, even though it is a relative small amount of your total debt. The point is to get positive feedback, which helps with your discipline. Now do the same with the next smallest loan.
Invest or pay directly? The choice is a personal one. As long as you remained disciplined, either should get you where you want to go. As an added benefit, paid off student loans will crank your credit report score up dramatically.
About the Author:
Is there a poor credit student loan? Yes. Should you apply for it? Find out at USStudentLoanCompanies.com.
The Silver Lining of Paying Student Loans
Nov 3rd
Two things are certain when it comes to the life of a college student. Loans and taxes. Seventy percent of students today wind up with more than $20,000 in student loans that they must repay. Being hit with that large monthly bill may seem a bit unfair at first until you recall spending all of that money.
Receiving your first student loan repayment invoices can be a shocker. When did I borrow so much money? Who in their right mind gave it to me!? The panic will subside once you put together a plan, but it can certain be a rude introduction to the life of an adult.
As if student loan repayment bills were not enough, there is a second rude introduction to the adult life. Yes, I am talking about taxes. How can they take so much?! Well, it can be a brutal awakening, but at least the government is going to give you a break.
The repayment of student loans is such a hot issue that there are millions of strategies out there for dealing with them. All of them take years to work, unfortunately. The good news is your repayment efforts will generate a tax break for you during the same period.
Student loan payments are comprised of principal and interest. The interest you repay is a tax deduction you can use year after year while repaying your loans. That deduction is capped at twenty five hundred dollars, but that is still a lot.
This large deduction can have an interesting impact on financial plans. Many graduates decide to only make the minimum payments on their loans. This is okay if you save up the extra money and invest it, but not if you blow it on toys.
If you are only paying the minimum on student loans, you should have extra cash around. Here is what you do with it. The first step is to put aside 12 paychecks worth of income as an emergency fund to cover your for any problems that arise.
Once this money has been accumulated, leave it alone. Do not be tempted to spend one dollar from that emergency fund. Next, start to pay off those credit cards. Did you know that most students have around $2,500 in credit card debt? It will take awhile to pay off that debt, but it must be done.
Congratulations, you are way ahead of most people. Your next step is to start saving and investing money. Use something like Sharebuilder to do it automatically. Once you have enough money, pay off those loans for financial freedom.
About the Author:
To locate student loan companies that can offer conventional financing for college, visit USStudentLoanCompanies.com.
When College Loans Attack
Nov 2nd
There are so many great things that come with higher education that it is hard to know where to start. Of course, all those positives come with a price. For most of us, that price is known as student loans and those first shocking invoices after graduation.
Once you start repaying the loans, a question will quickly develop. Should you invest your extra money and pay the loans off in one fell swoop or are you better of throwing the extra money at the balance each month?
Of course, you may be wondering where exactly you are supposed to find this extra money. The truth is you have it, but do not realize it. Setting aside $100 a month adds up to $1,200 at the end of the year. The question is where to apply it and the interest rate of your student loans can be an indicator.
If you have student loans, a good percentage are government oriented. They tend to have low interest rates on them compared to private loans. This may tempt you to pay them down first. In truth, you might want to invest that money and pay them off later.
To figure out the best option, consider the difference between the cost and return. If you find an investment that pays 10 percent in dividends like Canadian oil stocks versus a 6 percent interest rate on your student loans, the investment options looks pretty good.
Admittedly, there are other issues to consider. One is whether taxes will change the balance. Capital gains taxes are 15 percent if held longer than a year. You also need to consider whether you will have the discipline to leave the money alone. Only you know.
Obviously, you also need to be comfortable with your decision. If you are unfamiliar with investing or unsure about it, then do not use the strategy. There is nothing wrong with paying off student loans directly. Do whatever will let you sleep at night.
If you prefer to work on the loan balances directly, how will you approach it? There is one strategy that works well. The first step in applying it is to break down your loans from one giant debt into smaller pieces you can financially and emotionally handle.
Your first step is to pick the smallest loan. After you make all your monthly payments, apply whatever extra cash you have to that small loan. Be disciplined. Since the loan is probably relatively small, you should be able to pay it off quickly, often in less than a year.
Once the loan is paid off, you will feel a sense of accomplishment. Yes, even though it is a relative small amount of your total debt. The point is to get positive feedback, which helps with your discipline. Now do the same with the next smallest loan.
Whatever your choice in this matter, your goal should be to pay down those loans as quickly as possible. The faster you go, the sooner you will be free of your student loan obligations. When you pay them off, your credit will also be golden and banks will lend you money hand over foot.
About the Author:
ACS student loans are government backed financing. Visit USStudentloancompanies.com to learn more.