Archive for June, 2012

Congress Prevents Student Loan Rate From Doubling

Jun. 29th 2012

New subsidized Stafford loans for college undergraduate were scheduled to double (from 3.4% to 6.8%) on July 1st. But last Friday, June 29, Congress approved a bill that will extend the 3.4% interest rates on student loans for another year. The House passed the bill 373 to 52 and the Senate 74 to 19 (NY Times). All the opposing votes were by Republicans. President Obama is set to sign the bill in the up coming weeks.

7.4 million students expecting to get educational loans this up coming year can rest easy for another year. If the bill had not been approved, the student loan participants would have been looking at an extra $1,000 to the average cost of each loan.

Recent college grads are already having financial issues paying off their loans as it is. Currently, the average college student is graduating with over $20,000 of debt.

Certain city communities are beginning to see student debts as opportunities to attract young, college graduates to become residents.  Rural counties such as Niagra Falls, NY are offering to pay off debts of recent grads who move to their location. To be eligible, residents must hold either an associate’s, bachelor’s or post-graduate degree, have an outstanding student loan balance and establish residency in a participating county (CNBC article)

 

 

 

 

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The Enlightened Borrower’s Loan Agreement Series: Episode 3 – How To Structure A Loan To Protect And Enhance Your Relationship

Jun. 8th 2012

Episode 3: How To Structure A Loan To Protect And Enhance Your Relationship



A successful loan can strengthen the bond between the lender and borrower simply because the experience builds trust and appreciation for one another. Here are simple guidelines to make sure the results of your experience are pleasant and constructive.

Timely Payments:

  • Take this loan seriously and execute the loan agreement with timely payments.
  • If anything prevents an on-time payment, immediately inform your lender.
  • Set an alarm in your phone, pencil it in your planner, and maybe even have a close friend help remind you (If you decide to use LendingKarma, you will have the advantage of  receiving friendly email reminders).
  • Keep track of your repayment history. (LendingKarma has a versatile payment tracker that can adjust to expedited payments, underpayments, or late payments. LendingKarma’s payment tracker will help keep things on track with a high level of transparency for both parties).

Communication:

  • If a complication arises, be sure to immediately communicate the details of the situation to the lender. Do not wait for the lender to find out on his/her own.
  • Make sure you are not flooding the lender with emails and phone calls, especially if you know that he or she is a busy individual.

Post Loan Communication:

  • When the loan is repaid, be sure to send a follow-up message to the lender about  the overall experience. If anything went wrong, address what you could have done better. If everything went as planned, make sure the lender knows you are appreciative.

Our users tell us that one of the main reasons they use LendingKarma is for the exact reason of preserving/enhancing the relationship between their lender or borrower. LendingKarma knows drawing up and executing a loan agreement can be a burden on a relationship. You can think of LendingKarma as the knowledgeable mutual friend of the lender and borrower that helps keeps track of all the details, so the loan runs smoothly for both parties.

Thanks for being a responsible borrower. Pat yourself on the back for taking the initiative to expand your knowledge about loans. We, here at LendingKarma, hope you feel more “enlightened” and confident in all your future loan endeavors.

Best of luck!

“Real knowledge is to know the extent of one’s ignorance.”- Confucius

 

 

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The Enlightened Borrower’s Loan Agreement Series: Episode 2 – How To Ask For A Loan

Jun. 1st 2012

Episode 2: How To Ask For A Loan


There are various approaches to successfully asking for a loan. LendingKarma offers a rather effective one: a friendly loan proposal document that can be presented in person or via email. LendingKarma’s loan proposal document introduces the reason for the loan, provides the loan proposal summary, and offers a potential payment schedule.

It is recommended to stray away from impersonal types of communication (i.e text messaging). One great advantage about communicating over the phone or in person is that it allows immediate feedback and assessment on how willing the person is.

It would be smart to answer the following questions when creating your loan:
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  • What will the loan be used for?
  • How much money is needed?
  • *How much money can I afford to borrow? (look at you DTI-debt to income ratio; discussed more below)
  • How will the loan be paid back?
  • What will the repayment schedule look like?
  • Will collateral be used for the loan?
  • Who pays for fees related to documenting and servicing the loan?
*DTI = amount of money coming in vs. money going out

EXAMPLE:

$1,000/month in bills
$4,000/month in net income
$1,000/$4,000 * 100 = 25%

Guidelines for DTI:

36% DTI or less is considered good financial shape.

42% DTI or above is considered poor financial shape.

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Carefully address these issues and you will be better prepared when asking for a loan.

Best of luck!

 

“You can make more friends in two months by becoming interested in other people than you can in two years by trying to get other people interested in you” -Dale Carnegie

Check out episode 3: How To Structure A Loan To Protect Your Relationship

 

 

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