|
Student Loan Q&A
May 18, 2012
There is a character in the Dickens novel, David Copperfield, named Mr. Micawber who shares a timeless message about money management after dealing with his own overspending issues which resulted in a brief stint in debtors’ prison. He says,
"Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."
It doesn't matter in which century this guidance is given, the directive to spend less than you earn is truly timeless, intelligent advice for more reasons than you might realize; because while your growing debt and dwindling savings show the immediate consequences of spending more than you earn, there are also some hidden dangers.
- Stress: If you constantly have to worry about how you're going to pay this bill and that invoice, buy groceries, and manage your overall finances, you are going to be constantly stressed. Not only will this erode your self-confidence but it will also downgrade your quality of life. Spending less than you earn may seem like a roadmap to Boring Town, but you’ll actually find that having a financially stress-free life is more entertaining than shopping for things you can't afford.
- Living a lie: When you constantly spend more than you earn, you begin to create a life based on a fundamental lie. From outward appearances, you may seem to be doing very well but one look inside your checking account and credit card statement exposes the rot and ruin under the surface. Creating a lifestyle appearance based on a lie is not only harmful to you, but it perpetuates certain stereotypes and can encourage others to embark on the same course.
- Unexplored potential: If you never challenge yourself, how can you ever know what you are capable of? When you consistently spend more money than you earn you ask nothing of yourself in terms of control, discipline, and financial forethought. When you don't even try to be a responsible financial success, how can you know what great things you could possibly achieve?
Many people overspend because they assume that someday, their earnings will catch up with their spending habits. They think that this eventual increase in income will help dig them out of the hole they've created and will allow them to continue spending as they have been. Unfortunately spending more than you earn is only going to sabotage your health, confidence and financial future.
Like this article? Spread the word by Commenting or Sharing this article below!
type="text/javascript">
0 Comments
Student Loan Q&A
May 17, 2012
|
Q. What’s the difference between federal loans and private?
A. Student loans can be either federally funded or privately funded by a bank, credit union or other financial institution. Federal loans, such as the Stafford loan generally have a lower interest rate than a private loan but have more stringent limits for borrowing. Private loans have more aggressive interest rates and will often have much higher lending limits. Federal loans could be subsidized, meaning that no interest accrues while you are in school. The interest rate on private student loans can be variable which means that they can go up and down over time and they may have different options for deferment than you might find in a federal loan.
Q. Does my credit matter?
A. When applying for a private loan your credit score will determine whether you are approved, whether you need a cosigner, and how high your interest rate can go. For a federal loan program, credit is not evaluated.
Q. How much should I borrow?
A. It's never a good idea to walk into your post-college life saddled with debt. Instead, if you can, try to walk out into your new career as unencumbered as possible. Borrow as little as you can get away with in college and you'll spend much less time and money paying it back later.
Q. If I get approved for a loan, should I even bother with other assistance or scholarships?
A. Even if you decide to get a loan, you should look into other assistance such as scholarships and the federal Pell Grant. Any means you find of reducing the amount that you have to borrow is a good thing.
Q. Should I live on loan money?
A. Whenever possible, try to minimize your living expenses so that you can support yourself on savings or a small part time job. If you have no choice but to supplement your living expenses with loan proceeds, always remember to live with as limited a budget as you can. After all, you don't know how long it will take after graduation to actually find a paying job and you won't want to spend your income paying back college expenses for long.
Q. Will I get a tax deduction for loan payments?
A. Students can receive tax deductions when they make loan payments that include interest. Your lender will send you a form at the end of every tax year letting you know how much you paid in interest. Students may also qualify for a tax credit for their tuition expenses. They may be able to take this credit even when paying for tuition with borrowed money. It's best to talk to a tax preparer for more details.
Like this article? Spread the word by Commenting or Sharing this article below!
type="text/javascript">
0 Comments
Auto Loan Q&A
May 16, 2012
|
Q: Should I get an auto loan or should I buy a car for cash?
A: As long as the car you buy with cash is mechanically sound, it is almost always a better idea to purchase an automobile outright rather than financing one. All used cars will have some mechanical repairs that they need and some can be quite expensive, but they will probably not be as expensive as the interest on a three-to-five-year loan.
Q: Should I finance my new car through the dealership?
A: No, no, one-thousand times, no. As a credit union customer, you should take advantage of the advantages afforded you including the benefit of an auto loan with a low interest rate and without all the hidden fees of a loan through a financing company or dealership.
Q: How will my credit rating affect my auto loan?
A: Your credit rating will first decide whether or not you can even qualify for a loan and, if you can, how high your interest rate will be. If you can wait to buy the vehicle it could give you some time to improve your credit score a few points and lower your potential interest rate.
Q: Can I afford an auto loan?
A: Only you can decide whether you can afford an auto loan or not. You must look at your budget, look at your savings, consider both the payments that the auto loan would prompt and the additional insurance charges you'll face at purchase, and think about how changes in your workplace and career could affect your ability to continue to make payments. Remember—an auto loan is a form of credit. If you default on the loan it will affect your credit score negatively and the car could be repossessed.
Q: When should I apply for an auto loan?
A: It's always a good idea to get preapproved for a loan before you start shopping for a vehicle because then you'll know the most that you can spend. It's also a good idea to talk to a loan officer at your credit union to get an idea of what the payments would be for the various loan amounts that you could be approved for. Remember, just because you're approved for certain amount that doesn't mean you have to spend up to that amount; you can select a less expensive vehicle and even shorten the term of the loan so that you make larger payments for a shorter period of time and save on interest.
Like this article? Spread the word by Commenting or Sharing this article below!
type="text/javascript">
0 Comments
Some Common Financial Myths Debunked
May 15, 2012
Financial decisions can seem like they take place on a landscape filled with hidden landmines and in some cases, they do. Some of these landmines are found in the purposely nebulous conditions for financial products and some are found in the unshakable faith that we often put into urban legend. Let's debunk a couple of these myths and legends now and help make your financial landscape a little less mine-filled.
- Extended warranties are must-have for every purchase. Unfortunately extended warrantees often have a very limited list of qualifying events that they cover. That doesn't mean that they aren’t worthwhile to have, just that you must understand what a warranty covers before you decide to buy it. While some warrantees make cover repairs that are caused by normal wear and tear, others may only cover failures that stem from unexpected and accidental equipment breakdowns. Some may even provide for a brand-new replacement after a breakdown. You have to decide which ones make sense for you to buy, and which don’t. Read the fine print of the extended warranty before you buy and don't let aggressive sales tactics take over your better judgment.
- Car insurance is a waste of money if you never have an accident. When you pay for auto insurance, not only are you compliant with state-mandated regulations, but you are also providing protection against possible catastrophes that you can't pay for out-of-pocket. Your return on the investment of premium dollars is the knowledge that your insurance company will pay for certain damages and losses after an insurable incident.
- Auto insurance deductibles are just away for the insurer to scam you and get out of paying benefits. Many people get frustrated when they have a minor accident and submit an auto insurance claim only to find that the amount of the claim falls within their deductible. But deductibles are the amount that you choose to pay in order to help offset your overall premium expenses. If you have a high deductible, you’re paying a much lower premium than you otherwise would—that’s the trade off.
- I don't own a house, so I don't need life insurance. A life insurance policy can help your parents pay for burial expenses after you die. The proceeds can also assist them in paying for bereavement counseling and taking time off of work to adjust to your loss.
- I'm young and I have all the time in the world to save for retirement. When you consider the amount that you need to financially support yourself during your retirement years, a number that many experts fix at upwards of $1 million, you will quickly realize that it's impossible for the average person to save that much money over the course of their working lives. The only way that one can hope to be successful is by starting young, saving money in a tax-preferred account, and allowing their money the time it needs to grow in order to meet their future needs.
Like this article? Spread the word by Commenting or Sharing this article below!
type="text/javascript">
0 Comments
|
|
|
Your CU Links
Special Deals
