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Student loan relief isn’t enough to calm recent graduates’ repayment stress

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By Seni Tienabeso, Lindsey Griswold, and Anthony Rivas, ABC News

(NEW YORK) — By his account, Elie Kirkland shouldn’t have been at Morehouse College’s commencement last year, when billionaire Robert Smith pledged to the class of 2019 to “put a little fuel in your bus” by paying off millions of dollars in their student loans.

Kirkland was one of 396 graduating from the historically black college. The senior was supposed to graduate in 2018 but didn’t because of financial aid issues. Kirkland had fallen behind on credit card payments and his parents had taken out loans to help him graduate. Before Smith announced his promise, Kirkland was ready to walk away with over $100,000 in debt.

Instead, he owes nothing.

“When that happened, my credit score, first of all, went up tremendously,” Kirkland told ABC News. “I just have so much more freedom. I’m not handicapped to that bad credit monster.”

Jordan Randle, part of the class of 2020, wasn’t as lucky. With the coronavirus pandemic in full effect, his commencement was canceled; his family came together for a small socially distant gathering in his backyard. His student loan debt now stands around $30,000.

“I almost feel bad saying that,” he told ABC News, “because I’ve literally said that and some students have laughed, like, ‘I wish I had your case,’ which is sad. … Moving [out], getting my new car, trying to apply for another credit card — just doing those typical adult things have been a lot harder.”

Now entering the workforce, both Randle and Kirkland said that with the cost of higher education so high, the system needs to be re-examined — that as student loan payments loom, some people may not be able to find an adequately paying job to pay them off.

“There are a lot of people who are struggling or who have that degree and can’t find work. … They’re using every penny to pay off that debt — basically just going to school just to pay off that debt,” Kirkland said.

“A lot of people are stuck in so much debt that they can’t even do what they studied for,” Randle added. “So what’s the point?”

Federal student loans have been suspended and their interest waived since President Donald Trump signed the Coronavirus Aid, Relief and Economic Security (CARES) Act in March. Through an executive order, he extended the suspension for some federal student loans to the end of the year.

But when payments resume, many people still won’t have jobs that allow them to pay off their student loans, which total $1.7 trillion nationwide.

Lowell Ricketts, lead analyst for the St. Louis Federal Reserve’s Center for Household Financial Stability, said a degree is still worth getting but that the payoff isn’t nearly as guaranteed as it was a generation ago.

“[Student loans have] outpaced inflation and other growth in prices and wages for many, many Americans, and so, it gives us a sense of crisis,” Ricketts told ABC News. “The returns, relative to the generations that came before, are starting to weaken when it comes to wealth.”

For graduates of color, the center’s data shows the returns are even weaker. For Black Americans born as early as the 1960s, having a college or postgraduate degree was statistically insignificant to their wealth. On average, they essentially broke even.

“It points to some of the fundamental wealth gap sources as being deeply entrenched in our history, and shows how difficult it is for any one family or individual to escape from some of the systemic gaps in wealth accumulation that we see based on race and ethnicity,” Ricketts said.

Nick Ducoff is the founder of Edmit, a company that helps students navigate the financial aid process to get the maximum benefit. He says a college degree “is still worth it,” but that it’s important to know the financial responsibility you’re signing up for ahead of time.

“The average college graduate earns nearly $1 million more over the course of their lifetime than a comparable high school graduate without a degree,” Ducoff said. “So, generally speaking, it’s worth it. But the devil is always in the details.”

Since 1998, the average price of college tuition has risen 183%. <>> From 1989 to 2016, the collective balance of outstanding student loan debt for U.S. families rose from 8.9% to 22.4%. <<>>

Nearly 7 out of 10 students from the class of 2019 signed up for some form of student loan, graduating with an average debt of nearly $30,000. These graduates joined 44 million Americans with student debt, 11% of whom have loans that are at least 90 days delinquent or in default.

For some former students, the debt is too much to handle. Katrina Williams said she was working at a Starbucks, a call center and delivering mail on Saturdays, and she still couldn’t afford to pay a $700 monthly payment.

“Even if I worked three jobs until I paid nothing but my student loan debt … I still wouldn’t be able to pay it off within the next 30 years, and that’s why you’re just like, ‘I’m not gonna pay them,'” Williams said.

With over $100,000 in student loan debt, the stress of which she said caused her to constantly break out in hives, Williams moved to Japan to teach and, one day, just stopped paying her student loans. While she was relieved from her decision, she still feels the system doesn’t work.

“The days when I was 18 years old and my eyes were full of stars and I’m like, ‘I’m going away to college’ … I had no idea what all those giant numbers meant when I was a kid,” she said. “People are starting to realize, ‘Oh, those millennials aren’t just eating avocado toast to be lazy. They’re in crippling debt.”

Ducoff said people who see their student loan debt adding up should try to exhaust every repayment option available, like income-driven repayment plans, which can help minimize the burden.

“Make sure you understand what options are available with respect to addressing your student debt,” he said.

He also said that students aren’t alone.

“There’s a lot of, unfortunately, other students that have an awful lot of student debt,” he said, “and there are communities online that they can find and meet others who have been chipping away at that.”

Although he’s already begun working full time to help pay off his loan, Randle still wants to see the system overhauled.

“I think the issue with the student loan system is it is basically combusting. … There needs to be change in our academic system in general,” he said. “Because I think it still benefits people who come from wealth because that’s who it was made for.”

Copyright © 2020, ABC Audio. All rights reserved.

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Bad Credit

Is The No Credit Check Loan The Best Option For You? | Branded Voices

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If you need extra cash and have considered applying for a loan even with a bad credit score, you might have already heard about the no credit check loan.

Image by Bermix Studio 

Many people opt for a no credit check loan as their last resort. Like any other loan options, a no credit check loan has its pros and cons. Knowing if this is the best option for you allows you to go consider both its advantages and disadvantages. 

But is it your best option? Is there another way to acquire cash without looking into your credit record?

The Advantages

Here are the other advantages of a no-credit loan:

No Credit Checks

You are considering this loan option because the lender will not bother to check your credit report. It doesn’t matter whether you have a good or a bad credit score as long as you are eligible and can comply with their requirements. 

This benefit is one reason why this loan option attracts many borrowers, especially those who don’t have an impressive credit score and those who are still building their credit records.

Other loan options will require you to provide a good reason why you are acquiring the loan. 

For example, lenders will ask you how you will use the loaned money aside from knowing your capability to repay the money you owe.  But with the no credit check loan, lenders will ask you this kind of question during your application. 

The Disadvantages 

Just like any other options available out there for you, a no credit check loan also has its disadvantages. These things may be huge factors for some consumers, while to others, they’re just minor inconveniences you need to deal with. 

Higher Interest Rates

One of the most common and obvious disadvantages of a no credit check loan is its higher interest rate. Since the lenders will not bother looking at your credit history and rating, they will impose a higher interest rate on your loan. 

The higher interest rates imposed are due to risks they take in lending you their money without even knowing if you can pay it back. This is a common rule for all lenders who offer a no credit check loan. 

Required a Minimum Loan Amount 

If you only need a small amount, a no credit check loan may not be the best option for you. Lenders require a minimum loan amount when you apply for a no credit check loan. Most personal loans with no credit check will require you to loan a higher amount than other loan options such as payday loans and single-payment loans. 

May Require A Collateral

Lenders may require you to have collateral as an assurance for the money you are borrowing from them. It is also to secure their part if ever you cannot pay back the cash you borrowed from them. If you default on your loan, the lender will forfeit the collateral. Collateral can be in the form of any valuable assets such as a house, vehicles, and jewelry.

Quick Process 

Another positive thing when acquiring a personal loan with no credit check is the speedy process. You can get the money in just a few minutes or hours as long as you comply with all of their requirements and are eligible for the loan.

Reminders Before Applying for This Loan 

There are things that you should watch out for when opting for this loan type, especially if you do it online, such as:

  • Watch Out For Fake Lenders

This is the risk associated with a no credit check loan. Some criminals use this to lure their victims for phishing and identity theft. Make sure that you choose a legitimate lender and never give out personal information prematurely. It is best to ask someone you trust for a recommendation or for help with securing a loan from a trusted lender.

  • Prepare The Requirements Ahead Of Time 

It is best to prepare all the requirements before applying for the loan to help you acquire the money quickly. Check your chosen lender’s website or print ads for a list of requirements they will need. 

Even though this loan option does not require a credit check, it does not mean you are guaranteed approval. If the lender finds out that you are not eligible for a loan, your application will be denied. 

Takeaway

Asking yourself if a specific loan option is good for you is one of the proper ways to assess if you should apply for it or not. This practice should be observed in applying for no credit check loans and other loan types available. Remember, not all loans are suitable for you. One loan may work better for others but may not work the same for you. Hence, be prudent and choose the loan option that suits best with your financial needs.

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Learn to avoid these credit card habits before you regret making costly mistakes

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1.1893913-3511226063
Picture used for illustrative purposes only. Many still decide to confront bad credit card habits only after they are thousands of dirhams in debt.
Image Credit: Reuters

Dubai: Many still decide to confront bad credit card habits only after they are thousands of dirhams in debt. Here we discuss some lessons many regretted not learning before making mistakes that proved costly.

Although credit cards offer convenience, security, and rewards, overspending with a credit card and the interest and fees can bury you financially. So it’s important to know whether you possess such habits in the first place.

Four questions to ask yourself first

If you don’t know whether you have a bad credit card habit here are four questions to ask yourself to find out. If the answer to any of the below is yes, you are inching towards a credit card debtpile.

1. Do you pay only interest fees or minimum payments when you send in your credit card payment?

2. Have you ever paid your credit card late because you didn’t have the money for the payment?

3. Do you use your credit card when you don’t have enough cash?

4. When your issuer raises your credit limit, do you spend more because you can?

Bad credit card habits

While common mistakes include habitually paying your credit card late and taking out costly cash advances on your credit card, here are some uncommon-yet-dire mistakes that may slip under any user’s radar.

Habit #1: Missing out unauthorised or fraudulent charges

Keep in mind that one of the main benefits to reading your credit card statement is, it is one of the best ways to catch unauthorised charges and billing errors.

Don’t check your credit card statement for your balance and payment information, review the entire statement to verify your account activity.

By routinely checking your online or physical statement, you can also find out well before hand if your credit limit was lowered since you last checked – as it can change because of your credit habits or your credit history.

Habit #2: Paying only the minimum can cost you dearly

It is evidently easier to make the minimum payment and this is a habit credit card companies profit from as well.

Although paying just the minimum is more convenient than to figure how much extra you can pay towards your outstanding credit card bill, keep in mind that when you’re making only the minimum payment, you’re not making much progress toward paying off your credit card bill.

Moreover, unless you have a very low balance or a zero per cent interest promotion, you’re probably paying much more in finance charges than you have to.

Habit #3: Using your credit card more than your debit card

While it’s recommended you use your credit card to amass cashback rewards or points and also pay off your credit card balance every month, you shouldn’t opt to use your credit card over your debit card, if those aren’t the reasons why you would go about using them.

Your debit card is your direct access to the funds you should use for everyday purchases, like groceries, gas, clothing, and other expenses. If you use your credit card, it should be a decision with a plan for paying off what you’re charging on the card.

Habit #4: If you are transferring balances just to avoid payments

Although promotions like balance transfers are a widely recommended strategy to pay off a high-interest rate balance on your credit card, matter experts reveal that if you’re in the habit of pursuing such promotions to avoid paying payments on your credit card, this leads to amassing long-term debts.

Financial planners reiterate that many don’t realise that balance transfers typically have fees that will increase your overall balance if you’re never making payments toward the transfer. Moreover, if you’re making purchases on the card with such a promotion, the problem gets bigger.

Expert tips to take control of these credit card habits

Lesson #1: Pay your credit card in full each month

The best way to keep your credit utilisation ratio low and avoid costly interest charges is to pay your credit card balance in full each month – which also means you also don’t incur any large due.

It’s effective to control spending by not spending more than you can comfortably pay down each month, as this helps you reduce the likelihood of developing long-running credit card debt.

If you want to take in one step further, setting a monthly spending limit that’s well within your budget increases the chances that you’ll actually be able to zero out your monthly balance and avoid interest charges.

Lesson #2: Keep your credit utilisation ratio low

What it means by ‘credit utilisation ratio’ is essentially the link between your credit card balances and your aggregate spending limit. For example, a Dh2,000 balance on a credit card with a Dh5,000 credit limit equates to a 40 per cent credit utilisation ratio.

As a rule of thumb, your credit utilisation ratio shouldn’t exceed 40 per cent, and keep in mind that high ratios may adversely impact your credit score.

Financial advisors recommend aiming for a 30 per cent credit utilisation ratio, as that gives you some leeway to cover urgent one-off expenses, which can come unexpectedly as a result of maybe losing your job during the ongoing pandemic.

Lesson #3: Setting up customised spending alerts

If controlling your credit card spending is burdening you, it has been widely advised to set up customised spending alerts.

This will let you know when you’ve made an abnormally large payment or exceed a certain balance threshold and you also can pair these data alerts with security alerts to help flag any sham spending patterns.

Lesson #4: Using credit card rewards and points to your advantage

If you have a rewards credit card, you can use it to your advantage. If you have a pure cash back credit card, use any cash rewards you receive to put toward your account balance or directly deposit it into your savings account.

Alternatively, if you have a rewards points credit card, you can use your rewards to buy discounted gift cards to the stores you know, which will help save on future purchases without having to use your credit card.

If not, you could always redeem your reward points for cash redemption to put into savings or towards your account. However, ensure you know when your rewards expire to get the most out of them financially.

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When Can I Get an Auto Loan After a Repo?

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There’s nothing saying you can’t apply for an auto loan immediately after a repo, but the tough part is actually being able to qualify for the loan. Since many auto lenders don’t approve borrowers with a repo that’s less than a year old, you may have to consider in-house financing.

Repossessions and Your Next Car Loan

Unfortunately, most traditional auto lenders don’t work with borrowers that have a recent repo on their credit reports. When we say traditional, we’re referring to lending institutions such as banks, credit unions, online lenders, and the captive lenders of some automakers. These lenders often require a good credit score and clean credit reports.

Where does that leave you? Well, likely in-house financing is the next logical step if you need a car loan after a repossession.

More on In-House Financing

Buy here pay here (BHPH) dealerships use in-house financing. This way of auto financing involves working with the dealer who’s also your lender. There’s no need to find a third-party lender or preapproval – the dealer takes care of all that. This setup can be convenient, and often, borrowers are able to walk away with a vehicle the same day they first set foot on the lot.

Since these dealers may not check your credit reports to determine your eligibility for auto financing, your recent repossession generally isn’t an issue. If you can meet income requirements, prove you have stable work, secure auto insurance, and prove your identity, you might get into a vehicle after a repo with in-house financing.

Here are a few more details on in-house financing:

  • Used cars only – BHPH dealers only offer used vehicles. However, used cars are a good option for bad credit borrowers. They’re almost always less expensive than a brand-new car, and affordable is a good price when you need to get back on your feet after a repo.
  • Anticipate a higher interest rate – Without a credit check, lenders are taking a risk approving a car loan without knowing much about your credit history. To make up for this, they tend to assign higher interest rates. A high interest rate may be considered a good trade-off for an auto loan with bad credit in many cases, especially if you heavily rely on a vehicle to get by.
  • Credit repair may not be an option – If you get an auto loan with a lender that doesn’t check your credit, it’s a possibility that your on-time payments aren’t going to be reported to the credit bureaus. If you want to repair your credit with a car loan, ask the lender about their credit reporting practices before you sign on the dotted line.
  • Down payments are required – Few things are certain in the auto lending world, but one thing you can count on is needing a down payment if your credit is less than perfect. BHPH dealers often require a down payment of up to 20% of the vehicle’s selling price.
  • Prepare your documents – While a BHPH dealer may not check your credit, they’re likely to ask about your income and possibly your work history. You need proof of income to qualify for a car loan, no matter what lender you work with, so prepare at least a month of computer-generated check stubs. If you don’t have W-2 income, have copies of your last two to three years of tax returns.

Looking Forward After a Repo

When Can I Get a Car After a Repo?After one year, your auto loan options open up a little bit more and you’re more likely to qualify for a subprime car loan. Subprime lenders are equipped to assist bad credit borrowers. These lenders offer you a chance for credit repair because they report their loans and work with poor credit borrowers.

If you need a vehicle quickly, a BHPH dealership could be your first step in getting back on the road. Once some time has passed, and your repossession loses some impact on your credit reports, you can try for an auto loan that has the potential to repair your credit.

Here at Auto Credit Express, we know a thing or two about bad credit auto loans, and we have a nationwide network of dealerships that assist bad credit borrowers. We aim to match consumers to dealers in their local area that help with credit challenges. If you’re in need of auto financing, start right now by filling out our free auto loan request form. We’ll look for a dealer in your local area at no cost and with no obligation.

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