February 23, 2012

What is a Good Loan?

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Rare is the person who does not need a loan at some time in life. Almost everyone has a mortgage. Most people have a loan on their car, as well. Loans can come from family, friends, and banks. You can even get convenient installment loans online. But with so many options, how do you know which loans are good? Here are things you need to think about when choosing a loan.

APR

The annual percentage rate determines the actual amount you will pay for the loan over the long term. It includes the fees, interest, and other charges. A loan may look good on the surface, but the best way to compare them is looking at the APR. A good loan is up-front about all of their charges.

 

Pre-Approval

When you are pre-approved for a loan, the process goes much faster. Time is not wasted on lenders whose requirements are too strict for your credit rating. If your rating is poor, you can look for lenders who work with low credit scores. If a co-signer is required, you can have one lined up ahead of time.

Interest Rate

An interest rate is the fee the bank charges for lending their money. This is the main way a bank makes a profit. A bank that is owned by its members usually has the lowest interest rates. Higher interest rates are charged by institutions who are willing to lend money to people with bad credit scores or those who are willing to lend their money quickly.

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How to Qualify for Bankruptcy

If you are considering filing for bankruptcy, but are unsure of which chapter to file or how to begin the filing process, there are a few options you can consider.

Chapter 7 versus Chapter 13

There are two main types of bankruptcy available to individuals. Chapter 7 bankruptcy involves a complete liquidation of assets and the sale of those assets to the debtor’s creditors. Chapter 13 involves a complete restructuring of personal finances in order to pay off debts.

In order to file for Chapter 7 bankruptcy, one must meet certain criteria, including passing a means test. The test evaluates the person’s median state income to decide if the he is worthy of the relief provided by filing for this type of bankruptcy. The mean is calculated by taking the individual’s income over the last six months, annualizing it, then comparing it to the income of households of the same size in the debtor’s home state. If the debtor makes less than or equal to the state median income, he qualifies to file for Chapter 7 bankruptcy.

Chapter 13 bankruptcy is not a liquidation of assets, but a restructuring of debts to make the payment process more manageable for the debtor. This process involves negotiating a payment plan between the debtor and creditors in which the debtor agrees to pay his debt partially or fully over the course of the agreement, which can last for up to five years. In that time, the creditor is forbidden from making collection calls or other debt collection efforts, unless the debtor defaults on the agreed payment plan.

In order to qualify for a Chapter 13, the person filing must have a steady income and be able to make payments to avoid fines, as the court system supervises the filing from the beginning to the end.

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How to Deal with Student Loans You Cannot Afford

Graduation 

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Taking out student loans is sometimes the only you can pay for college when you do not get grants or scholarships. While it is not always easy to pay them back when you graduate, you cannot include them in bankruptcy, and defaulting will ruin your credit. Aside from cash loans, this is one of the most widely popular type of loan for students or young adults. Thus, you have to learn a few ways to cope until your income is enough to comfortably pay back the loans.

The first step should be to consolidate multiple student loans into one payment, if you happen to have a few to begin with. You can usually ask a lender or consultation company to complete this task. The result is that you will save a little bit of money on interest while also creating a single payment so that it is simpler to pay back the loans. Of course, if you cannot afford to pay the bill, a small interest reduction and a single monthly payment will not help much.

For this reason, your next step is to defer payments. Do so by calling your student loan servicing company and requesting a deferment. Find out how long you can do this. Most deferment periods last about one year, but you can usually end it early if you are suddenly able to pay. You typically get a few years of deferment periods total over the life of the loan, so use them wisely. Also, know that the longer you defer, the more your interest will build, meaning you will pay more in the future.

Many student loan servicers also let you pay back the total on a sliding scale. This means that if you make very little after college, you only have to pay very little. Just know that the interest will pile up, just as with deferment periods, so only use this as a temporary way to deal with high student loan payments.

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Tax Tips for Freelancers

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If you are self-employed, you likely do not have taxes taken out of a paycheck. You may feel a certain sense of freedom for most of the year, when you can do what you want with your money, until tax season shows up. To avoid panicking at the amount you owe the government in April, consider some ways to deal with this issue year round.

Many established freelancers have learned to pay quarterly taxes. This involves estimating what you will owe four times per year, and then sending a check to the IRS. If you overestimate, you will get a refund during tax time, while you will simply have to pay more at that time if you underestimate. This method may not let you keep your money through the year, but it prevents you from going broke every April.

Whether or not you pay quarterly taxes on your freelance income, you should keep your financial documents organized for when you do file. If you have business expenses that you would like to write off, keep the receipts in a safe file, separate from personal receipts. You should also keep any paychecks or other proof of income set aside, or even documented in a computer file so that you can quickly look at it when filling out tax forms.

If you are confused on what you can claim, and whether you should pay quarterly taxes, it is often worth it to consult an accountant. If the cost concerns you, find a coupon for this service, or wait until after tax time so that accountants are eager enough for your business to provide an inexpensive consultation. Meeting at least once can help you get any questions answered.

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Choose the Best Rewards Card

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If you are tempted to get a rewards credit card, you should keep a few things in mind. This type of card can pay off greatly, as long as you use it wisely and do not abuse it. Fortunately, though, if you are being offered a slew of rewards cards to choose from, you are likely generally good at managing your money. Just consider a few tips before choosing.

Of course, the first thing to consider is the actual rewards. Find out where you have to shop to get them, and whether there is a minimum or maximum amount that you have to spend. If you have to spend money on things you normally do not buy, such as plane tickets, then you will either waste cash or never use the rewards program. You should also find out how many points you must accrue before you can pick a reward, as sometimes it is tough to collect enough to ever get anything. Plus, you should find out what the reward is. Sometimes it’s cash credited to your account or sent via check, but you may also have a choice of gift cards to certain stores or useful items that you might like.

Be sure to also think about the aspects other than the rewards, like the interest rate and annual fees. If these are high, then the rewards may be negated since you will more than pay for them every time you use the credit card. Look for credit cards with good rewards that you will use, no annual fee, and either zero or low interest rates.

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