Joy Olivia Miller

Archive for the ‘Loan’ Category

In 1969, Elisabeth Kubler-Ross introduced the five stages of grief in her book “On Death and Dying”: Denial, Anger, Bargaining, Depression, and Acceptance. If you have a large student loan balance, then you’ve probably experienced some “grief” and are no stranger to the five stages. If you are in the “Acceptance” stage, this article is for you!

Being in the Acceptance stage is a good place to be. It means that: you have discovered that deferrals and forbearances are not forever (Denial stage), you have stopped blaming others for getting what you assumed to be a “free ride” (Anger stage), you have learned that you can not discharge your loan through bankruptcy (Bargaining stage), you have stopped drinking heavily and watching re-runs of the Gilmore Girls (Depression stage), and you now accept your financial responsibility and are prepared to do something about it. You are not going to find any “magic bullets” in this article, but you will find an effective strategy for paying off your loan in the shortest amount of time.

Step 1 – Organize Loan in a Spreadsheet
To better manage your student loan, you must completely understand what you are up against. Creating a spreadsheet will give you insight into how your loan works and show you the positive results of making extra principal payments. To create a functional spreadsheet, you must understand the terms of your loan and know how to organize this information into a spreadsheet. If you are not a spreadsheet user, you will find that learning the basics is easy.

To begin building your spreadsheet, you will need the following information about your loan: current balance, interest rate, payment amount, and how the interest is calculated. This will allow you to create an interactive spreadsheet that will calculate how much interest accrues daily and provide you with a daily balance.

How the interest is calculated may require some digging. You will find this information by reviewing your loan documents, going to the lender’s website, or calling your lender’s customer service number. The number of days used to calculate interest on a loan is known as basis. For example, a mortgage is typically calculated using “30/360″, which means a year is assumed to have 360 days and a month is assumed to have 30 days. Thus, when you make a mortgage payment, your interest will be based on 30 days. Student loans typically use the actual number of days in the month and a year with 365 days (actual/365). Some loans may use an actual/365.25 convention; each loan is different. On a loan with an actual/365 basis, you will pay less interest in a short month (one that has less than 31 days) than in a month with 31 days.

Feeling lost yet? Don’t worry, because once we put it all together it will make sense. I’ll also explain how to test your spreadsheet to make sure it’s functioning properly. The initial setup of a spreadsheet is the most challenging step.

On the top of your spreadsheet, insert the key pieces of information regarding your loan, such as: beginning balance, interest rate, monthly payment, payment due date, and the interest rate factor. The interest rate factor is the interest rate divided by the number of days in the year. Again, every lender and type of loan is different in terms of how many days in the year are used. The informational part of the spreadsheet is important because you want to clearly see the variables that impact your loan.

After you input the key pieces of information, you can begin the construction of your interactive spreadsheet. Your goal is to create a spreadsheet that shows when each payment is posted, how much of each payment is applied to principal and interest, and what the ending (or current) balance is. The column names that you will create are (from left to right): Payment Date, Principal, Interest, and New Balance. Below is a more detailed explanation of these columns:

• Payment Date – This is the date that your payment is actually posted to your account. This is critical since the interest on your student loan is likely based on the actual number of days between payments.
• Principal – This will be a formula that equals your payment amount less the interest portion of your monthly payment. It’s the part of your payment that will be applied to reduce your balance.
• Interest – You need to know how your lender calculates interest on your loan. Typically, it is based on the actual number of days multiplied by the previous month’s balance multiplied by the interest rate factor. Your Excel formula will be: (current payment date minus previous payment date) x previous month’s balance x the interest rate factor.
• New Balance – This is equal to your previous month’s balance less the principal portion of your current payment.

If your lender has a website that allows you to see information about your loan and/or make payments, establish online access immediately. Print the balance history of your loan and begin building your spreadsheet using your first payment as the starting point. The balance history should show how much of each payment was applied to principal and interest. This is how you can test your spreadsheet to make sure it is working properly. Check to see if your formula results match the history on the website. If they do not match you will need to troubleshoot to figure out why. It could be that the lender made an error, but more than likely the error is on your spreadsheet. If you have a friend or family member who is an Excel user, see if they can give you some assistance. The web is a great resource as well.

The real power of a spreadsheet is that you can simulate what-if scenarios easily. For example, let’s say that you receive a large cash windfall. You can input this figure into your spreadsheet and easily see what the results of such a big pay-down would be. You might learn that if you made this extra principal reduction payment your loan would be paid off in ten years instead of 15. You may find this very motivating. However, if you don’t have a tool such as a spreadsheet to generate this type of information, then you might choose do something else with your money.

Step 2) – Strategies to Accelerate Payoff
Congratulations on building a spreadsheet where you can track your student loan balances and payments. Tracking a loan in this manner gives you control over the loan. Getting a statement in the mail every month and not really understanding why your balance moved so little is not motivating and adds to a sense of hopelessness (and you really don’t want to go back to the cheap beer and Gilmore Girls re-runs). Here are some specific strategies to help you pay off your loan quickly:

Pay a little extra each month – We’ve all heard this before, especially when talking about mortgages. Well, the same holds true for student loans. When you make a monthly payment, part of that payment is applied to interest, and the rest to principal. My suggestion: Pay the amount of extra principal that will result in your loan balance having two zeros at the end of it. For example, if your balance will be $37,845.21 after you make your next payment, pay an extra $45.21 to make you principal balance $37,800. Getting your loan to an even hundred dollar figure is a strategy to encourage you to pay extra each month.

To facilitate this strategy, I suggest you pay your loan electronically. You have no control over when your payment is posted when you mail it. When you make an online payment, you typically select the payment post date. In addition, there will likely be a section to input the extra amount of principal you wish to pay.

The benefit of paying more than your minimum payment is that when you make your next loan payment, a bigger portion will be applied towards the principal and less towards the interest (compared to if you did not pay extra the prior month). If you continue to pay more than the minimum due, this effect will be compounded each month. The result is that you will pay off your loan significantly faster than if you only made the minimum payment. That is because as your balance decreases, the amount of interest you pay decreases. More of each payment will be applied to reducing the principal. This effect is easy to see when you track it on a spreadsheet, which is why doing so is an effective strategy.

Make a plan to pay “a lot extra” on a regular basis – If you get a tax refund each year, apply it to your student loan balance. This will have a tremendous impact on how quickly your loan is repaid. If you get a bonus each year, apply that as well. Any windfall, or instance of “found money”, should be used to reduce your balance. It is not uncommon for people to treat “found money” differently. “Found money” is often wasted on “splurge” items. Resist this urge! Use any extra money, no matter where or how you got it, to pay down your student loan balance!

In summary, the steps needed to help you pay off your loan quicker are:
1) Utilize a spreadsheet to track your loan so that you can see how much of each payment goes to principal and interest. Perform what-if scenarios so that you can see the impact of paying down your loan and formulate a strategy for doing so.
2) Pay a little extra each month. One strategy is to pay an extra amount such that your balance is an even increment of $100.
3) Commit to making large payments when you have a cash windfall, such as an income tax refund or bonus. While this may not provide an immediate reward, the long-term consequences will be sizeable. Time truly does fly, and what may seem like a huge balance now can be reduced to zero in a lot less time than you think, but only if you make it a priority and a goal.

Paying off a student loan can seem overwhelming. However, if you employ the strategies provided here, you’ll learn you can succeed more quickly than you ever imagined. You can apply these same ideas to your mortgage and other loans. Gaining control of your finances is empowering. And by the way, I started this article by referencing the five stages of grief. If you die, please know that in most cases your loan will die with you – unless you consolidated with a spouse. In that case, unfortunately, the loan will live on!

By Paul Anacki

Obama’s loan modification housing plan basically aims to assist borrowers by making their existing loans more manageable in line with household budget. We cannot possibly say for sure how well the plan will work out the long term, nor how sustainable it is, but the advantages laid out have been massive. As well as assisting borrowers to regain control of their finances, it is now also easier than ever for a homeowner to qualify for this assistance. It is much easier, for example, than qualifying for traditional refinance.

Obama’s loan modification housing plan is even open to those who are not yet in arrears. So even if you are up to date but do anticipate trouble paying in the near future owing to a change in circumstances, you can still apply. Homeowners on this scheme are given the opportunity to have the terms of their existing mortgages adjusted in order to make their monthly payments more affordable. Loan modification attorneys with infinite knowledge and experience in this area are also on hand to offer advice. This plan is basically the government run initiative to try to end the current housing crisis by avoiding foreclosure.

Although widely covered in the press, many consumers still do not really fully understand the details of Obama’s plan. Essentially the measures that can be taken in modifying existing mortgages and loan include reducing the principal, the interest rate and the monthly payment. Through government initiatives, both lenders and borrowers alike are finding themselves more willing to partake.

Fundamentally, the plan wants to prevent borrowers in arrears from ever actually losing their home to foreclosures. Lenders receive incentives to take people onto these schemes as well.

It is estimated that a huge 5 million borrowers will enter into Obama’s loan modification housing plan, with those most at risk of losing their home saved by more manageable payment plans. Although incentives are paid to both delinquent borrowers and to lenders alike, lenders actually receive extra incentives if they take on people who are NOT yet in arrears but who are struggling. It seems that Obama’s plan is winning favour with borrowers and lenders alike and is making massive progress in recovering the housing market.

If you find yourself short of cash near the end of the month then you may need to borrow some money to tide you over until your next payday. On these occasions you may require a debit card loan also known as debit card payday loans as they are only usually lent to you until your next pay day.

A debit card loan is so called because you use your card as a sort of guarantee to show the lender that you have a bank account and that you are paid regularly into your account. The debit card is also the method you use to repay the loan, your repayment will be drawn from your card and paid back directly to the lender.

Using a debit card to repay your short term loan is convenient for you as you do not have to worry about writing cheques or visiting your bank to make a payment. On the agreed date debit card loans are repaid to the lender, this date is usually arranged to be made once your next wage is paid into your account.

Applying for debit card loans is fast and simple, all that is required is that you fill out a short form online. This form usually only takes about 5 minutes to fill out and you can get an answer almost immediately. There is no need to post or fax any details and any information you provide over the internet will be protected and kept strictly private. Your personal information will never be shared or passed on to anyone else so you can be assured your loan will be kept strictly confidential.

Debit card loans are a quick, convenient and simple way to get the money you need fast. This online hassle free method suits many people who need cash in an emergency to pay for car repairs or unexpected costs associated with the home.

Loan modification is a revision in terms of a loan which results in alterations in interest rate, the principal amount or even the kind of loan program you are on.

Traditionally, standard refinance is more common as compared to loan modification. The necessity for altering the conditions or terms of the loan is essentially due to the difficulty the borrower may be facing in paying back the loan as per the originally agreed terms of the loan. Homeowners that default in payments have very difficult decisions to take as a consequence to the default. Some of the options available are a) foreclosure; b) short sale or c) Loan modification. Of these there options it is only under loan modification that the homeowner can retain possession of the house. In such a case, if the borrower is able to prove that they can make good the payment under revised terms, in a consistent and timely manner, will the bank consider allowing a loan modification. The change in terms could be increasing the amortization period (40 or 50 years), principal balance reduction, forbearance clause, temporary or permanent interest rate reductions or including an interests only option. (please refer to the Glossary for a better understanding of the italicized words).

The basic objective of loan modification is to allow the homeowner the opportunity of making the specific quantum of payment that he/she can reasonably pay after considering all monthly expenses. The bank would consider all aspects of the borrower’s expenses like phone payments, credit card liabilities, electricity, gas and water charges and the like. The bank would not require the borrower to spend all his monthly income on financing the mortgage as this is practically not feasible and reasonable. Hence, the loss mitigation department of the bank will consider all reasonable expenses for maintaining a normal lifestyle while calculating a reasonable monthly mortgage payment requirement.

Loan modification is a negotiation process between the borrower (you, the homeowner) and your lender (the bank). In some cases you may have a modification company deal with the bank on your behalf. The process involves submission of a proposal along with an Income Vs. Expenses Statement which you will see in the worksheet at the end of this book. This statement presents to the lender the sum total of your household income post taxes. Also, there is an estimation of your monthly expenses which include hard as well as soft expenses. Softy expenses are not so easy to identify and document. If the soft expenses are overestimated, you will be able to estimate the cash. The Income Vs. Expense Statement presents your monthly income which you can then compare with the expenses excluding the mortgage payments. The difference between the total income and the expenses is equal to the revised monthly mortgage, with the understanding that you would have left some surplus for incidentals in your expense side while preparing the loan modification proposal. Leaving nothing for incidentals is not at all practical.

Negotiation with the lender is the step that follows presentation of the loan modification proposal including the Income Vs Expenses worksheet. Negotiations will be dealt with later in this book.

Principle balance reduction having 1st and 2nd Mortgage

When you have first and trust deed holders, pursuing and getting principal balance reductions become simpler, mostly because the 2nd trust deed holder will get hardly anything in the case of foreclosure. When a foreclosure happens, the 1st deed holder is paid off and only any residual amount gets paid to the 2nd holder. In most cases, the 2nd holder is faced with huge losses and recovers very little, of any. That’s why the 2nd holder is in favor of allowing some reduction. As the bank would like to get at least 10-20% they would certainly not like a situation where you lose your house and they make losses, due to which they would like to prevent such an occurrence by any means.

When you have 2 mortgages holders you can have 2 conditions:
a) Where both notes are held by one bank and b) where the 2 notes are owned separately by 2 different banks. The first scenario is best for a principal balance reduction. They would rather securitize the first because the 2nd is mostly of no value to the lender. The 2nd could be brought down as low at one-tenth (10%) of what is currently outstanding provided they are convinced that you can pay off in time and consistently. Rarely would a bank reduce both the first and the second when payments are in jeopardy.

Reductions can be different if both mortgages are held by separate banks. A bank that owns just the second would look at the single note to ascertain losses. If a bank holds both notes, it would be reasonable to expect that the bank would forgive up to 90% of the 2nd to prevent bigger losses. But second trust deed holders realize that on foreclosure they would lose all, so they would allow principal balance reduction, even though it may not be easy. This realization often prompts the 2nd holder to push for a negotiation and prevent foreclosure.

If you want a favorable settlement you have to convince both banks to lower the balance as this could work out well not only for you by spreading the losses but also for the banks.

If you want to deal with a modification company, be careful that you do not get cheated to add to all your debt woes.

An auto loan after bankruptcy doesn’t mean you have to have a co-signer or collateral. By searching for the right lender, you can get into a vehicle at reasonable rates. However, a co-signer can help you qualify for better rates.

Easy Car Loans After Bankruptcy

Right after a bankruptcy, rates will be high for any type of credit, including car loans. However, by waiting for two to three years, your score can be in good standing again.

But most people need transportation, so you do have options before your credit is in good standing. One option is to get an auto loan through a dealership. This is a bad idea. Many scams can be found this way with high rates or bad cars.

A better option is to look online for reasonable rates on auto loans. You can get pre-approved and shop for a car either at a dealership or through a private seller. Rates will be slightly higher at first, but you can improve them by increasing your down payment. You can also refinance your loan when your credit improves.

Get a Better Car Loan Interest Rate with a Co-signer

A co-signer with a great credit score can help you qualify for much better rates. Your auto loan rates are determined by the co-signer’s financial history since they are also responsible for the loan.

If you do decide to apply with a co-signer, make sure you both understand the consequences. You can also apply for a guarantee loan, which places less requirements on the co-signer.

Affect of Having a Collateral Loan

Collateral affects your overall credit score when it comes to car loans. So by having significant assets, you may qualify for good rates even with a recent bankruptcy. A good idea would be to check your credit score to see were you stand.

Your car is also considered collateral as part of any auto loan. That is why rates are lower for this type of loan. In the event that you can’t make payment and the lender forecloses, your car would be sold. If there is a difference between the auctioned amount and the loan amount, you have to pay the difference.

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Homeowners having difficulty making their loan payments may be able to get the help they need by learning about the Chase loan modification process. Borrowers who are facing financial hardship and are facing payment default need to find out about the alternatives available to them to avoid foreclosure. Here are some of your options:

Repayment Plan: If you have a temporary reduction in your income or a temporary financial hardship, Chase may offer you a repayment plan to bring your loan current. This plan will allow you to make up the missed payments by paying a portion of the past due amount each month in addition to your normal payment. FHA Loan-Partial Claim: A loan is issued by the FHA insurance fund to pay the past due amount and bring your loan current. You sign a promissory note for the delinquent amount, however no interest or payments on due on this loan until the home is sold or refinanced. Your payments must be at least 4 months in arrears but no more than 12 months behind. Chase loan modification: Borrowers who have experienced a financial hardship due to reduction in income, medical expenses, death in family, or a legitimate increase in expenses may qualify for a loan modification.

The Chase loan modification process requires the homeowner to submit an application for loan modification that includes certain documentation that will be reviewed before a loan workout option is recommended. The bank needs to have a good understanding of your current financial situation. Below is a list of some of the information required by Chase:

Hardship Letter outlining the events which have caused the difficulty Financial Statement Pay check stubs, W2, tax returns Bank statements

It is important that the loan modification forms are completed accurately and correctly by the homeowner so that they will have a better chance of qualify for assistance. a clear understanding of what is required by the lender during the loan modification process can make the difference between an approval or denial. A successful loan modification results in a lower, affordable and sustainable monthly payment for the homeowner. A loan modification my include one or more of the following options to arrive at a new affordable monthly payment:

Interest rate reduction Longer loan term ie: 40 years Principle forgiveness to restore lost equity

IMPORTANT-Don’t wait until it’s too late to ask for help. The Chase modification process takes some time, so borrowers facing payment default should start now to learn as much as they can about loan modifications. Not all borrowers will qualify, so it is important to learn about the guidelines for acceptance before beginning the loan modification process. Even the most deserving homeowner will be declined if the paperwork is not completed properly. Now is the time to get educated and be prepared to save your home with a loan modification.