Starting to make some sense out of it...

But I did run across a few more acronyms/terms that I still dont know what they mean.

I forgot the other ones, but one of them was LIBOR?
What does this and other similar terms like that above mean?

LIBOR is simply and index often used in Adjustable Rate Mortgages. There are many, many different indexes that can be used, but LIBOR and Prime are the most common. Libor stands for London InterBank Offered Rate - and adjusts based on a huge variety of factors. The different indexes are often dependant of different factors, although on a large scale view they typically will follow each other - some faster than others.

Hope this helps a bit...

Stupid situation. I have a student loan with Sallie Mae. I always pay the thing on time, no problems. Well, for the last couple months I just plain forgot. The emails they sent me telling me my bill was ready looked just like the spamlike mortgage emails I get from them, so I passed them over.

Anyway, I finally checked into the site today, and what do you know, I am 64 days delinquent. Really the money wasn't a problem, so I payed all I owned, plus the next months right away.

My question is, what does this mean? I am pretty sure they report this stuff every 30 days right? So that means I would have been reported as delinquent twice I think. How big of a deal is this for me?

Thanks.

Well, my friend - it ain't good.

You're correct, typically it is reported every thirty days delinquent. As such, you likely have a 30 day late and a 60 day late reporting to your credit bureau. Those lates are likely going to cause your scores to drop substantially - specifically the 60 day late - for at least some time. The lates will continue to have an impact for the next seven years or so, but it will lesson over time.

Since I don't know if you have established any other credit, I can't really say for sure how big of a deal this is. However, I can tell you that it is something that you can recover from, and it isn't going to plague you for the rest of forever. Unfortunately, if you don't have much - if any - other credit out there, it will be much more difficult to get approved for other credit offers, or at least decent ones.

However, there may be a ray of hope - if Sallie Mae may not have reported you as late. With student loans especially, I have noticed that some people's reports are dead on while others said they have been late - although it doesn't reflect that on the credit beauru. Hopefully you're in the latter category.

Good luck - if I can help anymore, let me know :D

thanks. i generally have great credit (so i have been told) and my wife's is even better. Hopefully not too big of deal

I think I get what LIBOR means now. Well not exactly, but I'm guessing its just another index that they go off from. Is there any reason why Prime, and Libor are the two most common ones?

Another scenario. I have a client who's credit is sub 500. About 490 is what he told me. Now he is in a dire need of cash but there is nothing I can do with him, even with hard money lenders (due to high LTV), unless his credit score raises back up to 500, or above. Now he has his mortgage, a few credit cards, and a sears card on the report. What would help him raise his credit the quickest? Paying the balance from one company, say sears, off completely? Or just making the monthly payments on each?

The Prime and LIBOR index are most common simply because lenders make them - they could use any number of indexes to base their rates on, but choose those two most frequently. I'm sure there is reasoning behind it - and I would be willing to take a guess and say that those two indexes are the most likely to stay ahead of the bond market.

As far as the scenario goes, I can't help you very much without either obtaining more information or actually seeing the credit bureau.

If you want to do it the hard way, I'll need these answers to help you determine what would increase his score the fastest.

What are all his open tradelines?
High credit limit on each tradeline?
Current balance on each tradeline?
Is he currently delinquent on anything? If so, how delinquent?
LTV that you are looking for, and what are you doing with the cash out? Are you using it to pay down his debts?
Current FICO scores from transunion, equifax, and experian...

Hi NoSoup, I have some questions...

I am not a finance head. We've gone through some real oddities through the past few years. First off, I'm amazed at how sharp some lenders are and surprised how sloppy others are. I found out that the loan I had on my Jeep was going four months into arrears even though it was paid off. What tipped me off was the notice that it may be repossesed. I called, left a message of hellfire and brimstone, got a short note saying it was a mistake --NO APOLOGY--

But that's just the tip... whenever my wife and I apply for a subsantial loan, mortgage etc. we are told we have scores in the 700's. Our ratio is extremely tight because we have student loans up through grad school, and in fact would like to take on more so we can really get into the high earner category... but we drive old beaters, we wear unfashionable clothes and wear old shoes so we stay on the line. The thing is, we get turned down for this, approved for that. We bought a house at a great rate, looked at consolidation of all debts, and didn't even get the courtesy of a return call. I purchased an anniversary ring for our 1st, was turned down for a jewelry company loan, but had much more than the cost available in credit. I bought it for cash, which left us a little dry for books that semester. But, we graduated.

Another niggling thing is a credit card I paid off five years ago that still pops up on reports as being unpaid. I have the final statement, but I sure hate toting it around after four moves. I called them after the last time and threatened court action, but lenders have ignored that part of my report and believe me when I say it's wrong. This card company was bought out twice as I was closing it out. Why do we get turned down for penny anty things, but approved at low rates for big things? Also, how is it that so many things slip through the cracks that could seriously hurt us?

Thank you for this thread. It needs a bump frequently.

[QUOTE=Poppinjay]Hi NoSoup, I have some questions...

I am not a finance head. We've gone through some real oddities through the past few years. First off, I'm amazed at how sharp some lenders are and surprised how sloppy others are. I found out that the loan I had on my Jeep was going four months into arrears even though it was paid off. What tipped me off was the notice that it may be repossesed. I called, left a message of hellfire and brimstone, got a short note saying it was a mistake --NO [QUOTE]APOLOGY--

The reason you get such great rates on many of the big ticket items you purchase is because typically interest rate is based on your credit score more than any other factors. Because you have great credit, you qualify for very low interest rates. However - the reason you are likely being denied credit for other things is because of your high debt-to-income ratio. It has little to do with your credit standing, your ratios are probably just too high for the lenders guidelines. Additionally, often times there are more flexible programs for big ticket items - such as a house - than there are for a typical credit card or smaller end item.

As far as things falling through the cracks that potentially hurt you....

Unfortunately, it's the way the system is set up that makes wrong information damaging a lot more often than it is helping. Everyone starts with a perfect credit score, and pretty much everything you do related to credit damages that score. Although I can't say I've never seen incorrect information help a score - more often then not the information will damage it.

The reality of the situation is that credit reporting agencies have to rely on lenders to report information - and unfortunately they sometimes don't report it correctly. Because of the sheer number of people they keep track of, getting that information fixed often is a lengthy and frustrating process. What I would recommend doing is contacting the credit reporting agencies and asking for the form to report incorrect information on your credit report. It may take a number of days to get done, but they have to verify it or remove it within a set amount of time. The nice part is, once you get it taken care of from the credit reporting agency's side, it should be taken care of for good.

As far as lenders ignoring what you say is incorrect, they probably will continue to do so. There are very few institutions, if any, that will take your word for it without any proof of what you are saying. I know it may be frustrating, but a lot of people will tell you that the poor marks on their credit reports are mistakes, when at least a significant portion are not. Lenders pay for the ability to pull a credit report - they should have every right to expect that the information on that report is accurate.

Hopefully that helps - if you have any more questions, please let me know :D

hello my creidt sucks. i am 21 and my score is around 500 last time i checked. i need a unsecured loan of about 3500 for debt consalodation/student loans. i am currently working as a nanny under the table and have no checking account only savings. i will be a full time student in jan at a nursing school. i have about 4500 in debt from credit cards. i cant seem to get a loan anywhere i've applied at lots bad credit site on the internet and been to my own bank. i dont know what to do is my only chance to get a cosigner. i dont really have anyone i can go to to cosign . i need the money soon and dont wanna have to go to a bookie or declare chpt 13. please any advice is welcome

Well, it seems you are in quite the dilema. As far as getting a loan is concerned, from the information you provided (no documented income, low credit scores) a cosigner is very likely going to be your only option to get a loan from a bank. Another option you may want to consider is borrowing the funds from a family member or friend, but make sure that you draw up a contract to protect both of you.

I'm not really sure why you think you would need to declare bankruptcy, as you don't have all that much debt. Judging by your credit scores, I'm going to assume that you have collections out there. If you do, in fact, have collections, I would contact the companies and see if you can negotiate a lower amount due and/or a payment plan.

Hope this helps - If you have any more questions, just ask!

Hey NoSoup...this is a great thread you've got in here.

Here's my situation: I'm 21 years old and I'm going to graduate from college in May. I'll be starting a nice job when I graduate (~$60k), and I'm single, so I should have plenty. I've worked there since last summer and I'll stay on part-time until I graduate (in about 6 months) when I'll become salaried. My credit score is in the mid 700s, but everything on it is extremely new; a credit card that's been active for ~6months (always paid in full every month), and roughly $10k of deferred student loans.

What I'm wondering is: I've gone my entire life without a car, and frankly, I'm sick of it. The nanosecond I can afford it I'm buying a car. My question is: Is there any chance I'd be able to secure an auto loan now, instead of in 6 months? My salary until May is only about $900/month since I'm a student and working very few hours (this has also been my income for the last 6 months). Does an offer letter from a company make any difference when applying for a loan? (I'm sort of assuming it doesn't, since it could theoretically be withdrawn at any time.)

Do you have any advice for me? I'm desperate to find a way buy a car now, and not in 6 months. In addition, I don't really want to buy a used or ultra-cheap one, since I'd be able to afford a much nicer one when I graduate.

EDIT: Two things I forgot to ask..... do they count student loans/financial aid packages as income? I remember my landlord did just that when I got my apartment (I hadn't even known you could do that; seemed kind of strange to me) but maybe I can benefit from it again? It's all in one big lump sum though, so I don't know how you'd count it "per month."

Lastly, do you have any opinion on financing online vs. through an actual bank/credit union? I belong to Bank of America, but online seems a lot easier.

Thanks again.

To be honest, I'm not sure if you'll qualify for financing or not. Typically, I would say you wouldn't, but you have very high credit scores. Depending on the lender, some lenders are willing to overlook your actual income and give you a loan based solely on the fact that you have such high scores, meaning the chance you'll default is very low. However, many of the lenders that do that are going to require additional credit history, though not all do.

One thing you may want to consider is obtaining a co-signer, even if it is only for the time being and you refinance the vehicle once you become a full time employee. Another option would be just to purchase a "beater" or a cheaper vehicle that you can sell six months down the road for around what you paid for it. The value of a 10 year old vehicle is going to fluxuate very little over the next six months...

Most lenders are not willing to consider financial aid as income, although some might. The same goes for your letter of intent with your employer. However, smaller, more creative financial institutions - such as a local credit union - will have a greater chance of being swayed by such things. Another option, although it isn't one I would recommend - is a high risk loan. You'll be paying an absolutely ridiculous interest rate, and may even be limited on the vehicles you can purchase, but they'll lend to almost anyone.

Although this may not be what you want to hear, If you must get a vehicle now, I would go with a cheap used vehicle, at least for now. Hopefully, nothing between now and the time you secure your position would happen, but if it does, you (and potentially your co-signer) may be put in a postion that will ruin your credit, or at least make life difficult trying to keep up with a high payment.

As far as actual banks versus online companies, the choice is mainly personal, providing the institution you secure your loan from online is a reputable one. If you were to finance through a local bank or credit union, you'll have a place to go in person with any questions or problems with your account. However, often times online lenders are able to offer lower interest rates because they don't typically have the expenses of a brick and mortar institution. In situations such as yours, though, I would imagine that a smaller local credit union or bank will be more flexible with their financing options than a national company - be it online or not.

Hopefully this helps, if you have any more questions, please let me know!

Thinking about investing in residential rental property. Do lenders use debt to income ratios the same way when buying investment property as compared to buying your own home? What percent down payment do they like to see on investment property?

Lenders typically do use debt to income ratios when underwriting an investment property, however, there are programs out there that do not. Typically, they will include the rent from the property as income as long as you have a lease signed with the tenants. They do not use the full rental amount, but a pro-rated amount based on the vacency factor in your area.

As far as the downpayment on a rental property, typically they want to see more down than when purchasing an owner occupied residence. 30% or more down is ideal. However, there are exceptions to every rule, and some lenders have programs that will allow you to finance 100% of the purchase price of the investment property. Be careful, though, as often times the rates are substantially higher because the lender is taking such a large risk.

If you have any more questions, just let me know!

Thanks NoSoup, good info up there.

Here in the NYC area if you are talking about 5 family residences and higher it's 50% down and a substantial amount of liquid cash in the bank (I forget the actual amount but it's in excess of $1M IIRC.)

Ah, sorry - I should have clarified. Cynthetiq is correct.

What I state above applies to "Residential investment properties" - which are typically properties that house anywhere from one to four families. If is is more than a four family dwelling, it fall into the category of Commercial loans, which is an entirely different animal.

The information I provided, of course, is typical in Wisconsin - lender policies may vary from state to state.

(Taken from this thread.)

Construction Loans typically work a bit differently than conventional mortgages, they are more similar to a Home Equity Line of Credit.

Basically, once the construction loan is closed, there will be an initial dispursement of funds to the contractor. For Example, say you have a $300,000.00 construction loan, the builder will typically want money to start. Say he asks for $60,000.00. You will close the loan and take an inital "draw" of $60,000.00. Normally, during this initial draw, you will be required to purchase the land you are building on. However, in your case, you already own the property, so it doesn't matter. The builder will then spend that money, and down the road ask for another draw. Here in Wisconsin, you have very little to do with any of that, the builder simply works with the Title Company to get the funds when required.

As far as your payment is concerned, contruction loans are typically interest only based on the amount you currently have borrowed. So, in the case above, your payments would be based on a $60,000.00 balance, interest only, until the builder requests more. This should help you pay your existing mortgage, as your payments will be lower than if it was amortized over a specific period of time.

Be careful, however, as often there will be a set number of free draws and the title company may charge you for additional ones. I have seen fees for this range from $50.00 to $500.00 per draw. Each draw can be multiple checks, but each seperate instance of the builder requesting money is considered a draw.

To clarify, your builder requests a draw for $60,000.00 on March 1st. He wants $30,000.00 for himself, $20,000.00 for the excavators, $5,000.00 for the utility company, and $5,000.00 for permits. This would only be considered one draw. However, if he went on March 1st and got himself a $30,000.00 check, March 3rd to get a $20,000.00 check, etc. they would all be considered seperate draws.

Once you have completed your home, you'll likely have to refinance into a different type of mortgage. The only exception would be if you happened to utilize a "One-time Close" construction loan program.

Depending on how quickly homes sell in your area, I would plan accordingly. Ideally, you'll be able to time it just perfect so that you can move out of your old home and sell it just as your new one is finished. However, it is very unlikely that it happens that way. Even if it does, it is likely that the buyer of your home will take that into account when putting the offer in, and you may potentially get less than what you would have for your home.

One option you may want to consider is giving your current home plenty of time to sell. If, in fact, it does sell before your new home is completed, would it be possible to stay at a friends or relatives house for a short period? If it isn't are there any apartments that offer a month-to-month lease in your area? You would want to make sure you keep in mind the cost of the apartment/storage vs. what you would be paying on your mortgage or how much less the seller would offer if they had to wait to move in, but often times it will be better to be "homeless" for a brief period rather than carrying an extra mortgage payment until it sells.

Another advantage of selling your home prior to your home being completed would be that you have the cash in hand, and can apply it to the new property before you refinance it into a standard 15 or 30 year mortgage. Providing you have the equity, you should be able to reduce-possibly even eliminate- private mortgage insurance.

Hope that helps a bit, if you have any questions, let me know!

paying off a credit card
 

Hi NoSoup!

When I moved to Phoenix from Chicago a year ago, I used up most all of my funds to get established in the new location.. when it came time for my friends bachelor party, my only option for cash was a ($400) advance from my only credit card. This was June '05. I've since used the card for furniture, plane tix home, etc.. large purchases. Now I'm around $3000 of my $3500 limit. From what I understand, a $100 payment on my card covers the interest first (nearly $40) and the remaining $60 will go towards the principle. Furthermore my entire credit balance must be paid off before any of the payments will go towards my cash advance balance - and the cash advance interest is (of course) killin me..

My question is this: Would it be wise for me to open a 2nd card - a 0% APR for 12 month card offered by my bank - and use it to pay off the balance in full? In that scenario my first card would be paid off and I would have 12 months of interest-free payments on the balance of my 2nd card.. (now that I'm firmly established in Phoenix with a good job) am I correct in all this? I'm 23 and don't want to dig myself a hole I'll never escape.. I've been making $100/mo payments for 7-8 months and getting nowhere.

TIA!

ps i hope you were the right person to ask - if not i can repost this elsewhere in the forum! let me know, thx

Yep, you certainly can open up another credit card and do a balance transfer.

Of course, be careful and read the fine print when it comes to opening up the new card - avoid annual fees, ect. Once you've opened the new card, try and pay the balance off in full before the interest only period is finished.

If I can be of anymore service, let me know :D

I'm 21 and am finding i don't know much about credit yet. Iv'e just begun learning the basics.

My question today however pertains to apartments and exactly how your credit report effects eligebility. I got my first apartment about 2 years ago and had a cosigner/garaunteer. No problems with that one. When i went to get my second apartment, I was denied because my potential roomate had a substance charge on her background. I don't know if that denial shows up to potential landlords or not.

My second place was easy to got because it is a independent landlord and I'm not sure he checked much. Now I'm moving again do to my boyfriend finally getting a steady job after college, but sadly out of town. Our choices of decent apartments that allow dogs is somewhat limited in such a small town as we are moving to, so I'd like to get this place.

My first question is what exactly does a landlord take into account when looking at your credit report. I do have a small collection from a credit card, I opened when I was 19. I took on more than I could handle at that age with even a small limit of $200, and one accidental late payment stacked against me from then on until I couldn't afford it anymore. I now realize I should only take that on if I can afford a to pay for a mistake. My previous history with landlords is good, so that's not a problem(rent always on time, place not trashed and left clean).

Also If an application doesn't require you make 3 times the rent, does it matter. My boyfriend and I actually make above that but it doesn't state other sources of income on the application.

Also I don't have an extensive family with anyone who could afford to cosign right now. So my final question is, since my boyfriend has decent credit, would he be able to cosign for me or does it not work that way. That's probably a stupid question but I had so ask just in case.
bThanks for the patience with such a lengthy post.

If your boyfriend is moving in with you, it is unlikely that he would be able to cosign for you - rather, the landlord would look at both of your credit histories and decide from there.

As far as your credit report goes, your rental payment history doesn't appear on your credit. If the only thing you have out there is a collection, you may find it difficult to find a landlord that thouroughly checks credit history that will accept you.

However, I would recommend getting "Verifications of Rent" and submitting them with your application. Regardless of your credit history, if you can show that you have never been late on rent in your entire rental history, the landlord will likely take that into account.

I would recommend getting that collection paid off ASAP - contact the collection agency and see if you can negotiate a lower total, but even if you can't, I'd pay it off. With just trying to establish your credit, having a collection out there is going to be very detrimental. Even when it is paid off, it will still affect your score negatively, but it will affect it less than having it open, and show potential lenders/landlords that you do take care of your obligations.

I would also recommend trying to establish some other credit - without someone able to cosign, you would likely have to get a secured credit card to begin re-establishment.

When filling out your application, ensure that the landlord knows about all of your income - if you have to include it on a seperate sheet of paper, do so. You want to make yourself and your boyfriend look as appealing as possible as tenants.

Good luck, and if you need any more help, let me know!

Hi NoSoup,
Thanks for offering your advice. :D Would you mind assessing my current situation, and offering any advice regarding getting out of debt?

I am 22 years old, my annual income is roughly $30,000. I have almost no savings, and am contributing a matched 5% of pretax income to my company's 401K plan.

1) Student loans: 18,000 in consolidated student loans at 4.75% fixed interest.

2) Auto loan: $19,500 at 5% interest over 60 months (about 54 months remaining @ $367.30/mnth)

3) Health financing: Due to poor dental health, I am financing braces ($6300 at 10% interest over 60 months). I also need to finance extractions/other dental care, probably charging up to $1000 on my one major credit card (special 4.5% offer for the life of the debt).

4) Credit cards: I have one major credit card ($2300 limit, $700 used, 15% interest), 3 retail store credit cards ($3000 total, no balance on any). I just requested an increase on the major credit card so that my debt ratio will not be too high with the extraction/dental maintenance debt.

5) Miscellaneous expenses: Gym membership ($35), cell phone ($55). Car insurance ($330 every 3 months). No rent, utilities, etc.

I have mostly stopped eating out and buying lattes (or going out for fun for that matter), and have been living off peanut butter and jelly sandwiches, eggs and tortillas, and some other cheap stuff (lots of fruits and veggies). I do not spend much money, just on the necessities (and the occasional indulgence - like a book, sushi or shoes). While the gym membership is probably something that can be cut out, I would prefer not. It has become an important part of my daily regime, and is my opportunity to go out, release tension, and be healthy. When I can, I pay my bills twice a month.

Over the past couple of years, some bad decisions were made. For example, my old car started to fall apart, and I panicked and purchased a new car (I went with the '06 Honda Civic, which is very reasonable and reliable, but now it is clear I should have looked for a used car instead :rolleyes: ). I was able to pay down most of my credit debt, but it is still there and about to become greater due to the braces. I guess where I am right now (income wise) I feel okay paying off this debt as soon as possible, but I worry about what might happen (what if I lose my job, etc...). I would like to pay everything off as soon as possible so these fears will not be so invasive. Because of this way of thinking, there is nothing in my savings account.

Looking at this situation, what are your initial impressions? :confused: Sometimes I feel like if anything else comes along (i.e., unexpected costly events:eek: ), I will drown. Other times I feel like everything will be okay as long as I continue pay these items down as fast as possible. Please let me know what you think.

Thanks for your time!!

To be honest, it looks like your fine - at least, it appears that way on paper. For now, anyway.

However, I commend you for wanting to pay down your debts as quickly as possible - you'll thank yourself in the long run.

Let's see what we have here...

Approximately 30k a year, so $2500/month. So, we'll call it approximately $1750/month net. Hopefully that's at least relatively accurate, as it depends on the area you live in and your tax bracket, ect.

Your monthly expenses total approximately $767/month

Student Loans - $50.00/month
Auto Loan- $368.00/month
Dental - $134.00/month
Credit Card - $15.00/month
Gym Membership - $35.00/month
Cell Phone - $55.00/month
Car Insurance - $110.00/month

Obviously, this is only including your fixed expenses, and not taking into account gas/food/entertainment. However, it does tell us that you should have approximately $1000.00 left each month after your fixed expenses.

Although I wouldn't go crazy, don't be afraid to treat yourself every once in a while. Often times people hold themselves under rigid control over their finances, and forget that life is meant to be lived, not just rack up dollars in their savings accounts. However, moderation is key :D

I would definately start off by paying off your credit card (make the minimum payment you can on everything else, put all your extra money toward the credit card)

Once that is paid off in full, I would start paying down your Dental Financing, using the same strategy as before.

It looks as though you should be able to pay both those off in approximately 9 months, although it will depend obviously on how much you spend on food/entertainment.

Here is where it starts to get a bit tricky, and what I would recommend will depend on market conditions as well as your future plans. Both your auto loan and your student loan are at pretty low interest rates, and so providng rates continue to increase, you may actually want to pay just the minimum payments on those and stash the rest in a savings account or Certificate of Deposit(s). Keep in mind, though, that you will be paying tax on additional interest you earn. However, also keep in mind that generally student loan interest is tax deductible.

Providing you aren't in any hurry in leaving your current living situation (I assume you live with your parents, with no rental expenses or utilities) saving the money may be the course of action you would want to take. If your situation changes, you can always use the funds you have saved to pay off your debts if your situation should change.

However, if you are planning on moving out and living on your own, you'd probably want to continue paying down your debts to free up additional income for the extra expenses you will be incurring (rent, insurance, utilities) If that's the case, I would pay down your vehicle loan next and then pay off your student loans.

For future referance, although I see you may have learned your lesson :D - I would recommend purchasing a used vehicle next time. The good news, though, is the vehicle you have will typically hold it's value relatively well and Hondas are usually very dependable.

One other thing - is 5% the max that your company will match? If it isn't (normally it's 6%) I would recommend you bump that up to contribute the maximum amount the company will match.

Hopefully this helps and my figures aren't grossly off.

If you have any more questions, please let me know!

I think this is a simple question, but the simple ones always get me. I planned to loan an acquaintance $10,000 for a small business loan to be repaid in 5 years by a lump sum payment of $17,000. He would go to a bank if he could. This isn't usury in my state.

Today he said "I'd rather repay the loan in annual payments at the same interest rate." I'm sure I can figure out the payment schedule for him, but my question is: What is "the same interest rate"? I want to think that the loan we agreed to originally was simple interest at 14%.

My concern is that when we discuss this later, he'll say that I should calculate the interest rate of our original agreement based on annual compounding because now we're talking about annual payments. That would mean a lower annual rate (11.1%) would be the "same rate." I think the APR of our original agreement was 14% but the Effective Annual Rate was 11.1%. Am I using these terms correctly? What would a bank mean by "same interest rate" in this situation or is that phrase not used?

Basically, providing that you are calculating the interest for that year based on the amount that he owes, even if the interest rate remains the same, you obviously won't earn as much in interest.


I calculate your initial rate to be approximately 9.2467%. At this rate, $10,000.00 would net you approximately $7,000 in interest.

However, if he were to make annual payments based on that same rate, it would now net you approximately $2937.00. His payment would be $2587.40 annually. However, keep in mind that if he pays you on a date other than the scheduled one, the figures that I have calculated will be off.

At any rate, to keep the amount of interest you earn the same if he is making annual payments, you would need to charge him 20.7615%

Obviously the decision is up to you, but in my personal opinion 9.25% is a bit low compared to the amount of risk I believe you'll be taking. Unless he is a good friend or has a very, very stable financial situation that wouldn't change if his business fails, you may want to potentially increase that rate. He would be hard pressed to find an unsecured business note for that low of a rate, so I don't think that it would be unfair to charge more.

At any rate, I'll remind you to get absolutely everything in writing, and make sure you give him reciepts for the payments. Also, don't accept cash unless it's absolutely necessary.


********************

Whoops, I just reread your post, and saw that it was simple interest. The above information is calculated using compound interest compounded annually.

So, you are correct that using simple interest 14% would net you $7,000 after five years. However, if he is going to be making annual payments, you will obviously net less.

APR is basically the total cost of the loan, once you include all fees associated with that loan - including any recording fees, interest, etc. The effective rate is the rate at which the interest will be calculated.

If you friend does in fact want to keep the rate the same, simply keep it at 14%, but remember to calculate the interest amount on the new amount owed at the beginning of each year.

Hope this helps - I left my confused ramblings up top just in case you wanted a bit more information about compounding interest
If you have any more questions, please let me know!

Help!
 

Hi I am an actor here in Venice and have been hustling work for the past three years. I took out two credit cards back in 2003 to help me get going and I owe about $17,000 dollars. I am now starting to make some money but have been making 150.00 payments monthly per card.

One of my cards, the bank is charging me 30% interest and major late fees. Both cards have been delinquent as far as late payments, but I have been trying to work with both companies as there have been times when I just didn't have any money.

My question is, is there a positive solution to make both parties happy without all of my money going to these super huge interest and late fees... it seems that none of my money right now is cutting down the debt, meanwhile the total keeps going up...especially with Bank of America. I'm not the kind of guy to just not pay, I borrowed there money and except that fact. But they are killing me with these outrages fees!

Any solution? I haven't tried a credit consolidation company, what do you think? Best Regards!

First, NoSoup, you've done a really good job providing timely responses to everybody's questions. This thread is a really good read for somebody like me who's relatively new to finances and credit.

I have two items on my credit report that are in collections. One I will be paying in full within a week. The other is over a year old and is something I was unaware of. It isn't really my responsibility, but at this point I don't think I can prove that, so I'm thinking I'll just pay it as quickly as possible.

I also have two revolving lines of credit. One is a payday advance with a low limit (something like $120) through my credit union. I haven't used it in a long time and don't forsee needing it. Should I close it? You've said a revolving line of credit isn't a very good way to build credit.
The other is a credit card through the same credit union, with a $2000 limit. I'm currently well over 50% of the limit, about $1750. It seems it would be beneficial to get a second credit card with a limit of $1000 to $2000 and transfer part of my current card's balance to the new card. Then I can pay them off individually while keeping both under 50% of the limit.

I should also note that the interest on my current card isn't very bad. It's 11% BUT if I make the minimum payment each month (which is no problem) I am not charged interest for that month. Anyone else reading this, I highly recommend talking to a credit union in your area to see if their credit card policies are as nice as this, it could help a lot.

Am I overlooking or forgetting anything?

I don't know if I would try a credit consolidation company - typically, they damage your credit and do only what you personally can.

Although the interest rate is terrible, I imagine that your balance keeps increasing due to the late fees, as they certainly add up very quickly.

Unfortunately, there isn't a whole lot you can do other than contact the companies and see if you can get your interest rate lowered - but if you are consistantly late but still paying, it would be unlikely.

I suppose you could try to see if you could get a second part time job or something to help you earn some extra money to at least start making your payments on time. Then, at least, you won't be hit with late fees every month.

Good luck, and if you have any more questions, let me know!

In your situation, I would leave loan open and keep your current credit card. Although opening a new card and transferring a portion of the balance would get you below the 50% mark, I'm relatively certain the difference in your credit score will be nominal with the collections out there.

I'd pay those off as quickly as possible. However, if you truly aren't responsible for the second collection and it is a big enough amount, I'd fight it. If it's in collections, there's paperwork on it somewhere, and if you aren't responsible you should be able to get it removed. However, I caution you - just because you don't feel responsible doesn't mean anything - if you agreed to pay it, it is your responsibility.

As far as your credit card is concerned, I'd look again. Perhaps you are correct, but I kinda doubt it. I think it is more likely that the person explaining it to you neglected to make sure they explained it correctly.

With most, if not all credit cards, the interest that you would have paid is waived if you pay the balance off in full by the due date. I've never heard of one that just waives the interest if you make your payment on time. I'd check with your credit union again - however, at any rate, 11% ain't bad.

If it does in fact work the way you said it did, perhaps I should join your credit union :D

Hello, I hope you can help me. I have tried to find the correct help to no avail. I took out two secured loans in 1987 and 1988 for college from a local credit union. I applied for deferrment and used it up. The loan came due and I started paying the $89 a month payment in 1990 or 1991. No problem, until I realized my interest was paid off and they were still applying my payments to interest. I stopped paying and started calling and sending mail as I had moved two hours away. I tried to explain what was happening for TWO YEARS. The woman I was dealing with, who was vice-president of the credit union, finally admitted that they had lost all of the original loan papers. I called a lawyer who told me to stop paying, period. The credit unions tried to or did sell my loan twice, but I never signed anything with them and never made a payment. TEN years later, Sallie Mae contacts me about this loan that they have bought from whomever. They are trashing my credit and I do understand that I have these debts. But they are charging me interest from before they had the loan, plus it took them four or five years to provide me with any papers at all....they did send papers but they say copy. I am a single Mom, am owed $27,000 in child support and raising three kids on my own. I asked them to take the interest off of the loan and they said only if I make a lump payment of the full loan amount. Righto. I do not know what to do. I cannot afford the monthly payment. I want to know if the lawyer I talked to gave me bad information. If I do have any rights in this case I need to know who to go to for help. I have tried different lawyers and credit counselours and no one seems to handle secured loan issues. Any help, advice and info appreciated!

Wow.

To be perfectly honest, educational loans are by no means my expertise. However, I imagine that the reason it has followed you so long is because they are the only type of loan, and one of the very few debts that can follow you for that long. (I am assuming that the loan eventually went to collections)

Unfortunately, the only advice I can offer would be to contact an attourney about your case - I would think that somewhere there must be copies of the original documents that you signed.

I wish I could be more helpful - either way, good luck!

re:old student loan
 

I have never been sent to collections. That is what confuses me. Wouldn't thy have done something legally by now? Thanks for your help, I do appreciate you taking the time to read and answer my post. What kind of attorney should I contact? All of them so far have said they do not handle this kind of situation. Any more info greatly appreciated.

I'm not sure why it didn't go to collections - it may very well be possible that educational debts can't be sent, but I cannot say for certain.

At any rate, I am not sure if there is a specific type of attorney that you would contact regarding this matter. I'd suggest that you call a very reputable attorney in your area or have someone you trust refer one to you. If that attorney can't help you, it's likely that they'll be able to refer you to someone who can.

If there is anything else I can help with, let me know!

If I close a bank account (savings/checking) that I have had for twenty years, will it affect my credit score? I'm trying to figure out if there is any downside to leaving BofA and sticking my $$ somewhere where they aren't so stingy with interest rates.

If this was covered already, I apologize. I searched and didn't find anything.

Okay here's my question. Basically, I want to get financing for a car and I'll be looking at financing roughly $22,000- maybe as much as $24,000. I already tried to get financing through one dealer and they turned me down based on the short length of my credit history and because I only have one thing on my report- my current car, which I owe $5300 on (worth about $9500)
Here's my moola situation: I'm 21, I make about $32,000 a year. Credit score is 661 I have roughly $4,500 in savings, $75/mo cell bill, $195/mo orthodontics(2 years, zero interest), $250/mo insurance(im getting jipped i know), current car is $160/mo. Should I just pay off my car with my savings, and try to finance the whole amount of my new car- then sell my old car outright and put about $7000 into my new car and refinance for lower payments?(all this is assuming i could get my new car financed at all). I'm just trying to increase my odds of getting financed, really- I know I can afford it if I can find someone to work with me. Thanks.

edited cause I left out one of my bills.

Most financial analysts will suggest you not buy a car that is almost 1 year's wages.

Why not keep the car until it's paid off and save more for the downpayment, thus guaranteeing a better rate and chance at getting approved for a loan.

Actually I should have said the car is going to be 22-23k, after down payment I want a loan less than 20 grand, maybe as low as 17 if I can get a good deal on trade. Sound more reasonable?

Nope, it won't affect a thing, providing that all you have is a savings and checking account. If you had a line of credit (often referred to as "Overdraft Protection) for all that time, then it certainly may. Just the accounts themselves, though, will not.

Not sure if you'd be interested in it or not, but my Orange Savings Account with ING Direct is sitting at a pretty healthy 4.40% APY - no annual fees or minimum balance.

And before anything thinks otherwise, I'm not affiliated with them, but have had an account with them for over two years and have never had a problem with them. Signing up is quick and easy - they have pretty decent CD rates as well, again with no minimum. www.ingdirect.com

Thanks for the feedback.

Not a problem, that's what I'm here for :D

Alrighty, let's take a look...

Monthly income is approximately $1865.00

Current total expenses are approximately $680.00 per month. Because you didn't mention it, I'm going to assume that you are currently living at home and not paying rent.

That leaves you a net of $1185.00 per month, not including daily expenses like food, gas, clothing, etc.

I'm estimating here, but let's say you get a car financed at $24,000.00 for 48 months at 8%. That would put your payment at just about $586.00 per month.

So, let's look again -

Current monthly expenses are $680.00 per month
We'll subtract $160.00/month, with the assumption that you would sell your current vehicle, and then add $586.00. Additionally, we'll throw on an extra $100.00 per month for insurance, as you are presumably buying a newer car, are young, male, and single.

So, now you're looking at about doubling your fixed monthly expenses, up to about $1206.00 per month. That leaves you a net of $659.00 per month. Again, that doesn't include food, gas, preventative maintenence, movies, etc.

Here's the kicker, though. That would be fine, providing you want the car that badly. However - keep in mind that you're pretty much looking at this situation for the next four years or so. $659 won't get you too far once you move out on your own and have rent, electricity, water, groceries, parking, etc.

Here's what I propose...

Keep your current car for a minimum of another nine months. Take them payment that you would be looking at ($586.00) per month and apply that toward your current vehicle loan - make sure that you are comfortable with it.

Additionally, call around to some different apartments in the area that you would eventually consider moving in to, and find out what the average rent, gas and electric, and parking would cost. See if you can set that aside in your savings account in addition to making your would-be car payment. Providing you can do all of that comfortably, go ahead.

Here's the good news, though. In 9 months your current car will be paid off, allowing you to sell it outright if you would get more money for it that way rather than a trade.

Also, you should have a substantial amount stocked up in your savings account (I'm guessing at least another $5500.00) from "pretending" to pay rent.

Again, providing you were comfortable all through that process, go ahead and purchase your vehicle - except it should be much easier this time, as you'll have a much larger down payment and much lower payments if you finance.

However, if you struggle to make ends meet or lead a relatively miserable lifestyle for those nine months, be glad that you can stop it whenever you want, and you aren't stuck with it for four whole years.

In short, I agree with Cynthetiq - you're probably spending too much on a car for your income. Especially if you are considering moving out on your own before the loan is paid in full. However, the decision is obviously up to you (and the banks)

Perhaps that's too much information - I tend to get long winded at times. At any rate, I'll do my best to answer your questions just as you posed them.

The best bet to get financed is to have a lower loan to value ratio on the vehicle, so trading in your car/selling it outright and getting a smaller loan would likely be your best bet. Additionally, putting some of your savings down would also help. As the loan to value ratio decreases, typically the requirements to obtain a loan do as well, as the lender is less at risk. Another option would be to get a co-signer, just make sure that they know that they are fully responsible for the payments if you don't make them.

Keep in mind, though, that banks have a lot of experience lending money - if for whatever reason they won't give it to you, you'll probably be thanking them later.

Hope this helps, and let me know if you have any more questions!

That does help alot. I've been doing some thinkin, and I think my aim is going to be for a loan under $20,000, no more than 21. I'm going to shop around till I can get the car new for $22-23k(msrp of 28-33, its possible-other people are doing it). If I finance though the car company they go to 6 years at about 5% i beleive. Correct me if my math is off, but at $22,500(21k+tax, title,licence) thats 6750 in finance charges for 6 years so 29,250. 29,250/72= $405/mo. Sound more reasonable? is my math anywhere near correct?

edited to add: My monthly take-home is actually a about $2,000 to 2100- paid by weekly so more some months. All this math might be completely irreleveant starting in october, rumor has it we're going up to 12 hrs a day, that'll push my income waaaay up while ot is high.

Still a bit high, banks don't count OT as part of the factors in loaning out monies.

If your wages are $32,000 paid bi-weekly, then you'd be around $1,230 each pay period, not including taxes withheld. So you taking home about $2,100 is pretty good for the month.

Question, why are you getting rid of the car that you still owe money on? Poor performance? Breaks down? no longer fashionable?

If you are taking out a loan for 6 years, will you encounter the same kinds of forces to change such as desire to buy a new car because this one is played out or has lots of mileage but still performs with little maintenance?

Because its a dodge neon and they dont hold their value. Right now they are selling for about the same amount as i got mine for. You cant find the car I have with as few miles, and as clean an interior(hence should be able to get good amount out of it right now). Besides that, I don't like that its an automatic, slow and they're EVERYWHERE- I know of at least 5 identical ones I see around town all the time, same options and all- theres even one that works at the same place as me on another shift. The original plan when I got this car was to get rid of it before winter- I got it because i could get a newer one for cheaper than I could anything else and the car I was driving was dying(actually croaked 2 weeks after I sold it).

My Situation
 

Hello.. And Greetings. Wanna hear my story?

My wife and I make a decent yearly income. We own 2 homes (main home and vacation home). Have 2 cars, and have built up a decent 401K over the past 5 years.

But... We are 33 grand in credit card debt. We were doing OK until some of the card companies doubled the minimum payment, and gas was starting to cost $100 a week for my wife to commute to work.

I had some unexpected emergency expenses come up last month. For the first time in 5 years I am late, and late with all 12 of my revolving debt accounts.

I decided to look into a home equity loan, or a 15 year refinance. BUT.. Most lenders can't give me a "Good" rate, or refinance at 100% equity because of our credit scores. I believe our credit score is in the mid to upper 500's.

It seems my option is to seek credit counciling. Will credit counciling make my credit score fall more? I wouldn't mind selling the 2nd home, but the 2nd home needs about 3 grand worth of repairs. I would rather complete those repairs before I sell. But again, my credit score is too low and revolving credit too high for me to get a loan to fix the 2nd home. :)

Tough situation...

Unfortunately, as I'm sure you're experiencing, being late on 12 accounts in one month will severly impact your score.

Without knowing more details, all I can give you is very general advice.

First off, credit counceling will lower your score, and often times "A" lenders will refuse to give out mortgages to those people that have recently utilized a credit counceling service. In most cases, they don't really do anything that you as the consumer are unable to - they call up your creditors, try and negotiate lower rates/payments, and instead of you having to mail out checks to each of the creditors, they have you write them one check (usually with a hefty fee included) and mail out the checks themselves.

Again, as I am not very familiar with your situation, this is very general - but with that much debt, I would give serious consideration to getting rid of your second home. I imagine that it would decrease your negative monthly output significantly, and you can roll the additional monies onto paying down your credit cards ASAP. Although I typically wouldn't recommend doing this, I get the impression that you may be unable to continue your current payments for an extended period of time - you may even want to consider putting the repairs for the second home on a credit card. Again, it isn't something I would suggest doing normally, but if it will save you from bankruptcy or being late on your payments again, it may well be worth the interest that you pay.

If I can be of any more help, please let me know!

Thanks for the response
 

Thanks for the response!! How will credit counseling show up on my credit report? Will there be a notation from the Credit Card company? And if I talk for a better rate with the card company myself will that be reported as well? What is the length of time that will show up on my report? Is it the typical 7 years?

Credit Counseling seems a little shady. All these places advertise they are non-profit but yet charge hefty fees. Credit Card companies don't negotiate period. They have a strict set of guidelines the debt managment programs must follow. The card companies still dictate the rate, payment amount, and period of time to pay off the debt. Isn't it false advertising to say they negotitate for a lower payment and better rate? All these credit counseling places do is follow each card companies guidelines, and send them a proposal.


I might go ahead and put up the 2nd home for sale as is. At least it might get me out of the loan. The payments are only $156.00 escrow included. I don't have utilities hooked up. The payment is my only liability.

I apologize for not getting back to you earlier...

Better late than never, eh?

Credit counceling shows up on your report as basically a notation - but it will also damage your score. Additionally, many lenders that I've worked with will rate those consumers that are in credit counceling as bad or worse than those that have recently declared bankrupcty.

If you call the cards yourself and negotiate a lower rate, it will not show up on your bureau.

Although I am by no means an expert on credit counceling services, I deal with a number of clients that have had experiences with them. Unfortunately, I have yet to run across anyone that has had a positive experience. You're right - they basically just follow the credit card companies policies, and instead of you mailing the checks out to the companies, they have you mail just one to them (plus, of course, their fee) and then distribute it accordingly.

I would definately recommend not using one if at all possible - you're going to be just about as successful negotiating a lower rate or specific payment terms on your credit cards, and you don't run the risk of the credit councelling agency being late on your payments (a situation I have seen countless times) further damaging your credit. Just take the fee that you would be paying the credit councelling service and put that much extra on one card.

As far as non-profit is concerned, personal experience has lead me to believe that it basically just translates to "tax breaks" in the corporate world. Everybody's gotta make money somehow - they have to pay their employees, keep a roof over their head, advertising, ect just like any other company. To be perfectly honest, the absolutely most aggressive financial institution I ever worked for - and the most concerned with profit - was a local credit union.

Wow, this is in Living now, eh?

Anyone else have any questions? If this thread doesn't get bumped, I am not so sure it will ever see the light of day again....

I'll bite. This is one of my favorite threads on the TFP. It's helped me and many others so much.

I've got a secured credit card and am building up my credit and paying off every penny when I get the bill.

As someone who is financially savvy. Do you have an internet savings account? Whom do you use? I'm using ING; 4.5% is better that that .5% credit union rate, but they aren't leading the interest rate pack anymore. What do you think of their electric orange offering?

I know I am not the expert, I used to have ING. But I would recommend if you have a citibank near you to use them. They have an e-savings account that is 5% interest which is better then ING. Also the nice thing about citibank is you can take the money out asap through their ATM's. While ING you have to transfer the money back to a 'linked account' at your local branch. Or with their new checking account (they just opened) write yourself a check and then cash it back out. With Citibank you can have a linked checking account and can just transfer money back and forth online and it instantly moves.

Congrats on beginning to build your credit! You'll be thanking yourself later...

Personally, I do have an ING account as well. Because of the few day period it would take to get funds out, I do keep a reserve at my normal financial institution in a money market as well - my ING account could be considered my liquid mid-term savings vehicle. The rate is quite nice - although like you mentioned, there are better rates out there. For a long, long time though - ING was the best that I could find, and I've never had a problem with them.

I'm not too familiar with the "electric orange" account, I believe I just have the regular orange account...

I know this isn't quite up your alley, but here goes. I currently have two credit cards. The first is my first credit card, which I applied for when i was a Softmore in college to build up a credit history. It offers no rewards, but has been open for four years now and has a credit limit of $11,000. The second I got a year later, and gives cash back on purchases. For obvious reasons I always use the second card, but I keep the first one open to keep my credit rating up and in case of a really dire emergency (who knows when you'll need ten grad to get out of a Turkish prison or something?)

Now I noticed that the bank I got the first card from now offers a rewards card that has slightly better rewards under some situations than my current rewards card. I have a pretty good credit rating, so I think I'd be eligible. However, I don't want to close the old account and open a new one because it would damage my credit rating. Can the bank transfer me over to the new card without closing and reopening the account in a way that would hurt my credit rating?

Although it certainly doesn't hurt to ask, I highly doubt it. I'm sure the bank will have a policy in place to prevent people from doing that.

The only way to find out for sure is to give them a buzz :D

student loans
 

I have three student loans out right now and I cant afford the payments. I am considering student loan consolidation to lower the payments. Anyone have any experience with consolidation? Any suggestions?

A few questions for you.

As of right now now I have a $2400 loan on my car, paying roughly $92/month @ ~7.25% interest. I also have a $500 limit credit card which I recently just got, which I make small necessary purchases on, and then pay them off immediately online.

My main question is, would it be better for my credit to keep paying on the car at the current rate, or would it be better to start paying extra per month to get it paid off quicker? I am sitting on roughly $1800 in my bank account as of tomorrow. The loan is fairly new and the only reason I haven't touched it as far as paying extra is to build credit.

Second question, I've had my credit card for roughly 6 months, at a $500 limit. Should I try and get my limit raised? Will there be any implications if I do?

Third and last. With the $1800 I have in the bank, what would be the best way to invest with small amounts ranging from $500-1000? I'd like to keep 1000 put aside for a rainy day or an emergency. Currently I have hardly any money outgoing, and all my insurances are covered. I really hate seeing that money not gaining interest.

Credit History is exactly that - history. Although it will likely cost you around $215 in interest over the next 28 months or so, I would definately recommend just making your payments and keeping the term of the loan the same. It is a secured loan (the best type for your credit) and although the interest rate isn't phenomenal, it isn't bad. Additionally, it's only $2400, so it's an ideal way to build your credit.


It's up to you. Keep in mind that you never want it to go anywhere near your limit, so as long as you aren't charging over a maximum of $250 on it, you should be fine. If you do, try and raise the limit to double the maximum amount you will be spending in a given month. As far as implicatoins go, you'll get dinged slightly for having someone pull your credit report, but that's the nature of the game. Additionally, the ratio of money that you have borrowed vs availble credit will be lower, which is a good thing. I'd leave it alone at this point unless you are typically borrowing more than 50% of the limit, but if you are borrowing more, then increase it.

However, one thing to watch out for is payihg your charges off immediately online. Depending on how/when your credit card company reports, it may appear to the credit reporting agencies that you just simply have a $0 balance on your credit card. It would be better to charge anywhere from $1-$200 or so on it per month, then pay it off in full when you recieve your statement. You still won't be paying interest (most likely, check w/ your credit card company to be certain) and it will show activity on the card, as well as report with a balance.

The amount of money you set aside should be dependant on your expenses. I would suggest a minimum of three, preferably six months of expenses in your emergency fund, or at least $2500 - whichever is greater. However, every situation is unique, so if $1000 is good enough for you, it's good enough for me. It's unlikely that you have a financial institution nearby that will have a savings account with a decent rate for that amount of money, so I would suggest possibly setting up an account w/ ING Direct (www.ingdirect.com - I think the current rate is around 4.4% or so - which is about nine times the national average. Until you have your emergency fund set up with the amount you choose, I wouldn't recommend investing in anything that may potentially lose value. At least in my opinion, the ING account is idea for a variety of reasons - first of all, the relatively high interest rate. However, another benefit is that it takes a day or two to get the money transferred to your normal financial insitution. This should give you time to reconsider making some more expensive impulse buys, which seems to be the downfall of a lot of people's immediately accessible savings.

Once you have your emergency fund set up, you'll want to consider your options with what to do with additional savings. The key to answering this question is the length of time and the use it will be put towards, as well as how comfortable you are with risk. If you are definately going to need it next year for school, I would avoid staying away from accounts that may potentially lose value. However, if you think perhaps you'll use it in five years for a down payment on a house, you have a bit of time and may consider putting it into stocks (if you are saving regularly each month, I'd highly recommend a DRIP account) If this is money that you are going to save for retirement, a traditional or Roth IRA would likely be your best bet...

If I can be of any more help, let me know!

This was linked http://www.tfproject.org/tfp/tilted-...l-finance.html

So, lets start off with a question!

I'll be graduating in May with a Masters degree, I'll have $49,000.00 in student loan debt.
($39,000.00 in Stafford at 6.8%) and ($10,000.00 Perkins at 5%).

I will have a 6 month deferment period starting in May.

In August I will hopefully find employment, with a salary of between $38,000.00 and $45,000.00. For purposes of this discussion lets assume the lower figure.

I have no credit card debt, and no credit cards. No cell phone, and I own my car. Insurance is $300/3 months.

Now to the question:

What determines if I qualify for a home loan? With the figures provided how much would I be approved for? Using conventional wisdom how much could I safely afford for a house?

In previous threads you've mentioned that generally lenders look at your debt to income ratio to determine eligibility, but that post was made in 2003. With the current lending climate, have things changed? What am I looking at?

Thx!

IMO you are a complete risk since you have not credit now and in the future when you are looking to buy a house, you'll still have no credit history.

what's worse than bad credit???? No credit.

Get a card, use it for your day to day, and pay it off 100% at the end of the month. Not 99%, but 100%.

That will help you tremendously... NoSoup can talk about the current mortgage situation, but when I purchased a 3rd property last year, even with a FICO in the 700+ range they were still being very dodgy. We were turned down by a couple of banks, one bank wanted a premium because of the location we were buying.

Build your credit now. Start today.

Are Credit Cards the only reliable way of building credit?

I've seen what Credit Card troubles do to people, family and friends are still living with them and dealing with the 20%+ interest. If at all possible I'd like to continue living cash only.

I've been in this apartment here for 6 years, have never missed any utility payments etc. Has the credit report market changed at all to where that is reported at all?

Don't forget you can (usually) get a free credit report if you snail-mail in a request to a credit bureau. I think you build credit with student loans, utilities, etc. Best get a report to see what's going on and then go from there.

I'm not sure, but at the point that he is in the student loans are just debt load. There isn't any history of payments.

As far as utilities, that is a slightly different story, but I'll let NoSoup weigh in for that.

Just because you have a credit card doesn't mean you'll sink into the 20% interest trap. Again, you have to be disciplined to use the card and pay it off. It is that simple. Some utilities take credit cards. Pay your utilities with the credit card, then pay off your credit card with the same funds you'd be paying with a check. The only difference there is you're "building" credit.

Credit cards aren't the only way, it's one of the simplest. You could get any dept store credit card, or small loan (still credit based) to make a purchase for a computer, car, other large durable good. The idea here is to show that you are trust worthy to pay it back.

Understand that last few words in that line. Pay it back. See that's the problem with those with the 20% interest trap, they didn't pay it back. They continued to accumulate more debt. And still didn't pay it back.

It is a simple recipe.

Pay for all the goods you're NORMALLY going to pay cash for with a credit card.
Put that CASH someplace safe and don't spend it.
Use that CASH to pay off your credit card at the end of the month.

A variety of factors will determine if you qualify for a home loan, but primarily it's going to boil down to Credit History (including credit score), Loan to Value Ratio (How much of a Down Payment you are putting down) and Debt to Income Ratio (Amount you Earn vs. Debt Obligations on a monthly basis)

As far as how much you should spend safely on a house, it really boils down to your lifestyle. The current fad is that your PITI (Principle, Interest, Taxes and Insurance) coupled with your other monthly credit obligations is no more than 50% of your total monthly income. However, I would add that to do it safely you should not only utilize that formula, but spend no more than a total of 1/3 of your income on housing.

It will depend on your actual repayment terms of your educational loans, but roughly I'm coming up with a net income of approximately $2215ish per month (after taxes and insurance) In your situation, I would have my mortgage payment (PITI) be equal or less than $730 a month or so. Note: You likely will qualify more, and depending on where you live that might not come anywhere near what would be required to buy a liveable house, but going over that may make it difficult over the long term.

One thing people often forget is that it's a 30 YEAR commitment (or whatever, depending on your loan term) and that you have to plan for every eventuality. $730 a month might seem like a breeze now, but how does the next 30 years look? There are a huge number of factors that you need to potentially plan for - going back to school, losing your job, a wife, kids, what have you. A lot can change in that length of time, and you want a reasonable shot of remaining comfortable until it's paid off. It's much better to go a bit smaller than you think you'd be comfortable with and be able to pay it down faster than the alternative.


No, credit cards are only one reliable way to build credit. Now remember, this is based on your short post, but you seem relatively conservative when it comes to finances. Perhaps you'd be more comfortable taking out a secured loan for $500 or something. Yes, you will be paying interest, but consider it an investment - very few things in life will net you over your lifetime as much savings as having a good credit score.

You can read more at
NoSoup's Guide to Obtaining and Maintaining Excellent Credit

As far as utilities are concerned, they are not reported to the Bureaus. Nor are cell phones, Netflix, or anything else that you don't have to fill out a credit application for. Length of employment is, but only has a significant impact if you are employed at the same place for greater than 5 years.

Indeed - but now it's even easier. You can obtain free credit reports (One from each Credit Reporting Agency per year) at www.annualcreditreport.com

It's nice to see this thread getting a bit of interest nowadays - if any of you folks have any more questions, please let me know!

Thanks

Nosoup:

Thank you for your reply, and thanks for this thread!

You brought up a very good point about attempting to consider 30 years into the future, thank you for that. There is so much to consider that I really have to try and plan for the future.

About Student Loans
 

I've already gotten my federal student loans for 08-09 and 09-10.

I'm definitely going to be needing a private loan to make up for my cost of living expenses, which will be about $20,100 per year (including my rent).

My question is: In getting a student loan, should I include the tuition for my school, or should I hope that each year the federal student loan will cover me? I'm going to a small, private institution for my BSN. Three years, $72k total (I know it's a lot, but this was my decision).

Thanks :)

Nope- you haven't any guaranteed funding, so you can't include it.

However, when you apply, I would point out that you will likely get the funds.

If you chose not to, though - there is a term for that. Fraud :D

so, I have a couple more questions.

1) Do I get one loan for all three years, or one loan EACH year?

2) Based on the amounts I mentioned in my first post, what (in your opinion) should be a max amount I should apply for? How much more over my cost of living annually?

Sue, your school should have Cost of Attendance estimates for you--either you will have to ask the financial aid office for these or they will be somewhere on the website. Cost of attendance figures add up tuition, fees, books, and living expenses (including rent, food, transportation costs, and discretionary spending). Federal loans have annual limits; you will have to see what that is relative to the cost of attendance. This website has a table of loan limits: FinAid | Loans | Student Loans

What you will likely have to do is apply for a private loan to make up the difference. Estimated cost of attendance is fairly generous (in my mind, may not be to you); I advise that you come up with an alternative budget and only borrow what you need to privately. Private loan companies are not so generous or flexible with their repayment terms.

Regardless, both the feds and the private loan company will check with your school's financial aid office to find out what the cost of attendance is, and they will not loan you money above and beyond that cost. A private loan company will only loan you enough to make up the difference between your federal loans and the cost of attendance estimate. If your living expenses are higher than that, you're going to have to find some other source of money.

And with the feds, you'll have 2 loans a year--your unsubsidized loan and your subsidized loan. It will most likely be disbursed at the beginning of your academic term. With private loans, try to keep it to one loan a year. It will most likely be disbursed at the same time as your federal loans.

I may not be a loan officer, but I have been jumping through the financial aid hoops for a while now :)

Hello, I got a question. My wife name is the same as my sister in laws name. First and last name. Figures :confused: My sister in law has some collection agency's after her and because both her first name and last name is the same, the collection agency are sending her things to my wife. She is trying to avoid them so she so far changed her phone number six times already because they keep calling her.

I guess when they googled the name, the first name that popped up was my wife's and our address. For some reason when doing a credit report and I do not know why, both of my sister in law and my wifes social security are linked together somehow. That is where I am confused also.

But anyhow, all of my sister in laws debt and even bankruptcy shows up on my wife's credit report. She never filed for bankruptcy before and never had several credit cards showing up under her name. She only have one credit card which.

Tried writing to credit beaurea but does not seem to work. I was thinking about hiring those credit counseling to help but didn't want to waist any money if they wasn't going to get anywhere with it. So right now my wife's credit is all messed up because of the social security linking to each other, same first name and last name.

What do you suggest we can do to clear this up and with the least amount of money needing to hire someone to do it.

Thanks

First and foremost, I would almost never recommend going to one of the credit council scams... er... services.

This is a challenging (not to mention frustrating) situation to deal with, but ultimately persistance on your end will pay off.

You can check each of the credit reporting agencies for free at www.annualcreditreport.com and dispute innaccurate data right online. Depending on the specific circumstances, they may require certain documents as proof that it wasn't actually your wife that is on those accounts, but generally they are required to prove that it is, or they are obligated to remove the accounts from your wife's bureaus. Make sure, though, to do this with all three agencies, as most lenders look at a compilation of the three and if it's still reporting to one it will still negatively impact the score and actual loan itself.

Hopefully this helps - let me know if you need anything else :D

Soup,

Over the last fews years I have been working on paring down a great deal of credit card debt. At one point it was $32,000+ and over the last 4 years I've gotten it down to around $20000. I've recently gotten married and my wife has zero credit cards but just received an offer for a US Bank card with a 3.99% balance transfer rate through 2014. It just so happens my CitiBank card rate was raised to 12% in the past couple of months and it is the one I am focusing on now since it has the highest balance. So my questions is; if my wife got this US Bank card would we be able to transfer balances? Would she need to be added to my CitiBank card as a user? If we did that would it affect whether she is accepted for the US Bank card?

Thanks.