Connect with us

News

How Personal Loan Deferment Works & How It Can Help You – Forbes Advisor

Published

on

Sometimes it can feel like your back is against a wall if you can’t pay your bills. If you have a personal loan, your monthly payment might seem overwhelming, especially if you run into financial trouble. The most important thing to know is that you always have options, even if it doesn’t seem like it. If your lender allows it, a personal loan deferment is one of the best options because it allows you to temporarily stop making payments while you get back on your feet.

Personal loan deferment has its limits, though, so it’s important to understand how it works so you can use it without getting into deeper trouble.

What Is Personal Loan Deferment?

Deferment is a pre-approved, temporary break from making payments on a debt you owe, including personal loans.

To get a deferment you’ll first need to speak with your lender and explain your situation, whether it’s that you lost your job, your hours at work were reduced, you were impacted by a national emergency or you need expensive medical care. Lenders typically reserve deferments for people who are undergoing some sort of financial hardship.

And, while lenders aren’t generally required to offer deferment on personal loans, most are still willing to work with you. From a profit standpoint, it’s cheaper for them to pre-approve a borrower for a temporary break in payments than to start collections proceedings, after all.

How Deferring a Payment Works

When you defer a payment, you’re agreeing to put off that payment until a later date. For example, if you get a one-month deferment and you were originally scheduled to pay off your loan in November 2021, you’d now be paying it off in December 2021 (assuming you don’t have any more payments deferred).

If a lender agrees to defer your payments, it’s really important that you understand their rules. Specifically, you need to know when your deferment officially starts and when it ends. These two dates are important to know because you’ll be expected to make any regular payments outside of the deferment period. Lenders often only grant deferments in one-month intervals, but they may be longer.

If your next payment is due on Oct. 1 and your deferment was approved starting on Oct. 2, you’ll still need to make a payment in October, for example.

A borrower who is still having financial problems at the end of their deferment period can contact their lender to request another deferment. Some lenders have limits on the number of times a borrower can ask for deferment, while others go on a case-by-case basis. If your lender only grants deferments in one-month intervals, for example, you’ll need to contact them every month until you’re either able to make payments again or find another solution.

Will I Be Charged Interest During a Deferment?

Generally, if your lender does approve you for a deferment, interest will still accrue on the loan. So while you do get a break from making a payment, it’s not free—you’ll just have to pay for it later, in the form of interest.

You can get some idea of what this charge might be by reviewing your most recent statement. Your payment will be broken down into a principal portion and an interest portion. You can think of that interest charge as the cost of the deferral. It’ll just be tacked onto your loan, and you’ll have to pay it back later when you start making payments again.

In some cases, lenders are more lenient and won’t charge you interest—such as if there’s a natural disaster, a global pandemic or some other factor that’s affecting a wide range of people and is outside their individual control. But again, this leniency isn’t required, and individual lenders have their own rules about whether to charge interest in different situations.

Does Deferring Loans Affect Your Credit?

If your lender has approved you for a personal loan deferment, your credit shouldn’t be harmed.

Normally, each month your lender reports your payment to the credit bureaus as paid on time, paid late or delinquent. In general, if you pay late (or not at all) your credit will be harmed. But in the case of a deferred payment, they’ll instead report it as deferred. This means that they agreed not to take payment for that month so the missed payment won’t hurt your credit score.

Even so, you’ll need to keep in mind when your deferment ends. If you miss a payment after the deferment ends or forget to apply for another deferment, you’ll likely have to pay a late fee and will see a ding on your credit score.

What to Do if You Can’t Pay Your Loans Due to Covid-19

If you’re having trouble making your payments due to the Covid-19 pandemic, you’re far from alone. According to a June 2020 TransUnion study, roughly 7% of outstanding personal loan accounts are being paid back by someone experiencing financial hardship. That’s 27 times the amount of people who were having trouble paying back their loan in the same month of the previous year—before Covid-19 existed.

The good news is that many personal loan lenders—especially the larger ones—have publicly announced policies that provide relief in the wake of Covid-19. As usual, available options depend on your lender. But at least now we’re seeing that many lenders are offering extended periods of interest-free deferment, similar to the government’s handling of federal student loans. These are new policies, however, so you should still consider other alternatives to deferment.

Personal Loan Deferment Alternatives

Loan deferment is a great option if your lender offers it—but it’s not your only option. Here are some other things you can do if your lender doesn’t offer deferment, or if you’d rather try something else:

Ask Your Lender for a Modified Payment Plan

Technically speaking, a deferment is a modification of your payment plan. But if your financial setback is permanent and not just temporary, a better option might be to ask your lender to extend your loan’s term length. This stretches your payments out over a longer period of time. And while it can be more expensive in the long run, it also makes your monthly payments smaller and easier to work into your budget.

Refinance Your Loan

If your lender isn’t willing to change your payment plan, another option is to take your business to another lender entirely by refinancing your personal loan. It may even be possible to get a lower interest rate while you’re at it. Keep in mind, however, that you may need a good or excellent credit score to qualify for better terms.

Speak With a Credit Counselor

If you know you can’t make your payments now and your lender isn’t willing to work with you, consider speaking with a credit counselor. A counselor also can be helpful if you’re not sure whether deferment is the best option for you—or if an alternative is the better fit. Just make sure you’re careful here, because there are a lot of credit repair scams that have even been the target of legal action from the Consumer Financial Protection Bureau.

To avoid fraudulent credit counselors, we recommend getting a referral through the National Foundation for Credit Counseling, a nonprofit organization that provides affordable or even free financial assistance for people with financial difficulties.

Source link

Continue Reading

News

Are Sallie Mae Student Loans Federal or Private?

Published

on

When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

Learn more:

Source link

Continue Reading

News

Tips to do some fall cleaning on your finances

Published

on

Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

Source link

Continue Reading

News

How to Get a Loan Even with Bad Credit

Published

on

Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.

 

 

Source link

Continue Reading

Trending