Difference Between Subsidized And Unsubsidized Loan – Full Comparison

Difference Between Subsidized And Unsubsidized Loan – If you are planning to take a loan it is important to know all the options available in the market. One of the important factors that affect the repayment plan is subsidized or Unsubsidized. Before I start comparison let me tell you about both the loans.

  • Subsidized Student Loans

According to the financial needs of the student’s the Federal government offers subsidized loans, aid through the FAFSA. One of the best things about the Subsidized loan is that the U.S. Department of Education pays for accrued interest during the period of your school. To get this advantage you must be enrolled at least halftime.

A period of six months is allowed as a grace after completing the graduation. Simply the interest accrues during your college career and six months afterward is completely paid for. After the grace period ends you need to pay a monthly installment of principal and interest.

Remember the subsidized loans are available only to the undergraduate students. If you want to take the advantage of it you need to choose to defer your student loan.

  • Unsubsidized Student loan

The loan starts accruing interest from the date of your first loan disbursement. If you don’t want to pay the interest until you finish school, then the amount of money during your education period is added to the principal loan amount and you start paying off the new amount.

One of the best things about this loan is you need not show any financial need so you can take a much higher than a subsidized student loan. Apart from it, Unsubsidized student loans are available for both undergraduate and graduate students.

Difference Between Subsidized And Unsubsidized Loan

Difference Between Subsidized And Unsubsidized Loan

If you are an undergraduate student both types of federal loans carry the same fixed interest rate. It is the best option to take a subsidized loan before taking an additional debt like an Unsubsidized loan. If you are planning to go back to school, subsidized loans can save your funds in deferment since interest will not accrue.

If you don’t have a choice because of lack of financial need, your next option will be Unsubsidized and a private loan. As Federal loans have lower interest rates, private loans also offer very low variable interest rates.

In the Subsidized loan, the government sets the interest rates, there is no minimum credit score required for quality and rates are fixed. Although the amount which a student can borrow is limited. A student needs to finish the Free Application for Student Aid to become eligible for Direct Subsidized Loan.

The Direct Unsubsidized loan, federal loans, and the student must complete the FAFSA to be eligible. Eligibility for the Direct Unsubsidized loan is not based on the financial need and students are responsible for interest on Direct Unsubsidized Loans.

The Subsidized loans are for undergraduate students with a financial need which is determined by the cost of attendance less family contribution and other financial aid.

The Unsubsidized Loans are for undergraduate as well as for graduate students they are not based on the financial need. The eligibility is calculated by the cost of attendance less other financial aid. The interest on this loan is charged during in-school, deferment and grace periods. – Difference Between Subsidized And Unsubsidized Loan

What is a Subsidized Loan? – Everything You Need To Know About It

What is a Subsidized Loan? – A type of loan in which borrower don’t need to pay interest where the interest is paid by the third-party.  These loans include mortgage loan and student loan.

If you are planning on going back to school, the subsidized loan can help you to save a lot of money.

These loans are available for undergraduate students with financial need; it is determined by your cost of attendance less expected family contribution and other financial aid.

The federal government provides subsidized loans depending on the student’s financial need when applying for aid through the FAFSA. One of the biggest benefits of this loan is that the U.S. Department of Education pays for any accrued interest during the period you are in school.

To get this benefit you need to enroll at last halftime. You will also get 6-months grace period after graduation; it means that any interest that accrues during your college career and 6 months afterward completely paid for.

After finishing the grace period you are required to make monthly payments of principal as well as interest.

Note: Remember subsidized loans are only available for undergraduate students.

What is a Subsidized Loan

What is a Subsidized Loan

Don’t require your credit history

As you already know you can take a private loan independently if you have a good credit history. Simply if you have a credit card or a car loan in your name. You have paid the bills of these things on time you will have a good credit score. You will be offered more loan options at lower interest rates.

An enrolled undergraduate with financial need is eligible to get the Federal Loan.

No co-signer is required

High school seniors and college student without a long credit history can qualify for a private loan. Generally, a parent or grandparent agrees to pay the loan balance if the student is unable to pay.

The Federal loan is not a credit based, so don’t require a co-signer, it means your family is not concerned about taking on the repayment responsibility.

Postpone the Federal Loan payment for up to three years

If you are not able to afford your payments temporarily, you have two options. You are allowed to postpone or lower your payment due to economic hardship for a total of three years.

The private student loans have fewer features. Some lenders will lower the interest rate or allow you to pay only the interest for a period of time but the whole amount.

Lower interest rates than a private loan

During the year 2015-16 school years, the interest rate for the federal loan is 4.29%. Whereas the rate of a private loan is twice or three times as much depending on the credit score or your co-signer.

Apart from this, the rates of the federal loans are fixed and they will remain the same during your entire loan term.

Interest on deferred subsidized federal loans is paid by the government

The students who have higher financial assistance to pay for school qualify for Federally subsidized loans. The government pays the interest on a loan when it is in deferment. In both cases, if you are in school or take a break from the payment.

Forgiveness Opportunities

A Federal loan can be dissolved if you participate in an income-driven repayment plan or working at a nonprofit/ government. The Public Service Loan Forgiveness program gives Federal loans after a period of 10 years.

Consolidate Federal loans without a good credit

If you have multiple federal loans, you can easily consolidate the same into one payment. The consolidation makes some loans eligible for Public Service Loan Forgiveness and income-driven repayment plans.

Avoid taking the extra risk of borrowing the maximum annual amount of Federal loan once you take out a private loan.

How To Get A Business Loan – Complete Guide for You

How To Get A Business Loan – Generally, people need a loan to start a business. And want to know which type of documents required applying for a business loan. 

Every bank has its own requirements and many documents are mandatory across the lenders. Before applying for a loan keep in mind the basic requirements to keep in mind.

Business sometimes needs a loan to meet their regular operations until they have sufficient amount to cover their working capital.

How To Get A Business Loan

How To Get A Business Loan

Loan Application

Many banks have invested in the technology that allows online small business loan applications. On the other hand, many banks still require a borrower come to their branch and fill the paper application to get the money.

Applying for loans at multiple banks/institutions can be harmful as each one wants your business credit history. A bad credit record decreases the chances of getting funds as the banks interpret it as a sign of desperation that you are shopping around.

Personal details

The bank needs the basic personal background information data includes your current, previous address, aliases, criminal, educational etc.

Plan of business

If you are looking to secure a small business bank loan must have a ready business plan. The document provides a detailed explanation of what a business is and what are the plans for the owner to take it.

A business plan must include the following

Executive Summary

A single-page explanation of the business, its objective, operations, marketing efforts and revenue model is a key factor.

Business Description

What is the nature of your business? How can it earn the profit?

Local Market and Competitive Landscape

You need to describe where a business is based and who its target audience is. To check the competition as objectivity as possible and then describe how you differentiate your activities.

Product/Service

Explain the details of your product or service works. You need to highlight what makes your business that can attract customers.

The Staff of your company

Describe your staff, their knowledge, and experience.

Financial Data

Make a detail of break-even analysis, a sample balance sheet, cash flow projection and profit-and-loss account.

Investment details

Lenders want to know how much money the owner is putting into the company. If you are not willing to invest much of your own sources into it, investors will be wary about it. Provide an estimate of sale/revenue and type of return investor is expecting.

Appendices

Give the details of research conducted such as graphs, charts. Logos, other images etc.

Credit report

A lender will need your credit report this is the part of application process. You must obtain a credit report from major customer credit rating agencies before submitting their loan application to the lender.

Inaccuracies on your credit report can hurt your chances of getting a business loan. So try to clear the discrepancies before starting the loan application process.

Business Credit Report

If you are already doing a business and ready to submit the credit report for your business. It is vital to review your business credit report since beginning the application process.

The score of 650 is considered a good score. In case the credit score is 600 or lower, you may face difficulty in securing finance from a traditional lender such as a credit union or bank.

Income Tax Return

Bank requires applicants to submit personal Income Tax Returns and Business Income Tax Returns for the last three years. Providing business tax returns for a business is hard, especially in the case of a new business. In this case personal return carries a lot of weight.

Financial details

Bank typically requires profit and loss documents, balance sheet and cash flow statement. Many lenders need one year of personal and business bank statement to be submitted as part of your loan package.

Collateral

Some banks require collateral as loans involve a high degree of risk will require substantial collateral. The lender wants to know the cost/value of the personal/business that will be used to secure a loan.

Legal Documents

  • Bank requires borrowers to submit the following items
  • Articles of Association
  • Franchise Agreement.
  • Business Licenses and registration required to conduct your business.
  • The copies of contracts you signed with third-parties.
  • Banks both large as well as small have similar lending criteria. Many banks don’t give the loan to a startup business because they don’t have three years of Income Tax Returns.

How To Get A Business Loan

What Is A Home Equity Loan – Everything You Need To Know About It

What Is A Home Equity Loan – A home equity loan is where a borrower uses its home as a collateral. An equity loan is taken to finance major expenses such as home repairs, medical expenses or college education.

A home equity loan is a difference between the worth of your home and how much you still owe on your mortgage. The more equity you own, the more you can borrow. One of the best advantages of the home equity loan is that interest rates are low and tax-deductible.

Remember if you cannot repay the Home Equity loan, you might have to send your home to repay the amount of loan.

What Is A Home Equity Loan

What Is A Home Equity Loan

When life throws you on financial curveball it may be due to your credit card bill or you need to renovate your home. In that case, you need a handsome amount of cash that you don’t have. The Home equity loan is the best option in this case.

Uses of Home equity loans

  1. Remodel, renovate or improve your house.
  2. College Education fee for your family member.
  3. Mobilize the purchase of new investment such as home/land.
  4. Consolidate high-interest loans

Types of Home Equity Loan?

  • Lump-Sum Equity Loans

This home equity loan is similar to the primary mortgage. To borrow a lump-sum money, use the property as security and repay the amount of loan to the lender at the variable/fixed rate of interest.

  • Variable rate of interest

The variable rate is usually lower but can rise or drop during the life of the Home Equity Loan.

  • Fixed rate of interest

In the fixed-rate loans, the interest rate remains the same throughout the loan and you need to pay the similar amount every month.

  • Home Equity Lines of Credit

HELOC works similar to the credit card. The lender pre-approve your certain spending limit. You can withdraw when you need until you reach your limit. Home Equity Line of Credit has a different set term.

As you reach the end of the term, the loan must be repaid in full. The rate of interest for HELOC is variable and it is like a credit card, so your monthly payments depend on the amount you borrow and the prevailing rate of interest.

  • Reverse Mortgages

A Reverse Mortgage is a special type of home equity loan available for senior citizens (62 or overage). One can select the option borrowing a lump sum or be receiving the monthly amount, like a pension, temporary or until you die or sell the house.

The big difference between reverse mortgage and other home equity loan is that you don’t need to repay until you die or sell the property. Reverse Mortage is more expensive over the other loans, so you may want to explore another method of raising money before selecting to a reverse mortgage.

Why is the Home Equity Loan is Attractive?

Home equity loans are the attractive amount the borrower as well as the lender. I am going to mention some key benefits for borrowers.

  • Low-Interest rates

The home equity loan is available at the low rate of interest (APR) over the unsecured loans such as credit card/ personal loans. Of course! A low rate can help to keep your borrowing cost low.

  • Approval of the Home Equity Loan

If you have a bad credit history even then can qualify for Home Equity Loan. A lender has a collateral security to manage its risk.

  • Big amounts

A borrower can qualify for the relatively large amount of loan assuming that you have a sufficient equity. The big expenses like home repair, higher education, starting a new business or expanding the old one home equity will be a great source of funding.

  • Enjoy the tax benefits

You can claim the tax deduction for the interest you have paid for your Home Equity Loan. As your tax consultant for the details before you borrow and before you claim a deduction.

Sounds great! If you fail to repay the amount you lend the bank can take your property and sell it to recover the unpaid funds. So prioritize your home equity loan if you don’t want o lose your sweet home. What Is A Home Equity Loan

What Is An FHA Loan – Everything You Need To Know About It

What Is An FHA Loan – Federal Housing Administration is a branch of U.S. Department of HUD (Housing and Urban Development).

An FHA loan is a mortgage which is insured by the Federal Housing Administration. This is popular especially first time home buyers as they allow down payments of 3.5% credit scores of 580+.

A borrower can qualify for an FHA loan with a down payment of 3.5% for a credit score of 580 or more. Your credit can be between 500-579 if a 10% down payment is made.

What Is An FHA Loan

What Is An FHA Loan

This loan is backed by the government featured with attractive interest rates and less stringent qualification.

However, an applicant must meet credit-score and down-payment requirements, proof of employment and steady income. 

Benefits of FHA loan

1. Requires Low credit score and down payment

The FHA requirements for credit score and down payments are lower as compared to conventional loans. Borrowers need to qualify for an FHA loan with credit scores of 580.

2. FHA mortgage rates

The mortgage rates are lower than the mortgage rates on the conforming loans. A borrower with a credit score of 660 can get the same interest rate as would conventional borrowers with a score of 740.

3. Closing Cost

An FHA loan allows a seller to contribute more towards closing cost. FHA allows sellers to pay up to 6% of the loan amount to cover the buyers closing cost.

4. FHA loan is assumable

FHA borrower has another advantage over the conventional borrower. When an FHA loan holder is going to sell the property buyer can take sellers existing FHA loan instead of a new mortgage. It is a great option in case of the rising-rate environment.

5. FHA mortgage insurance

FHA loan has the cost related to the upfront and annual mortgage insurance premiums.

6. Borrow money for home repairs

A borrower can buy extra money for repairs to their homes. This advantage of the loan is called a 203(k) is that the amount is not based on the current appraised value of the home.

Steps to get FHA loan

1. Application for a loan

Make sure you qualify for an FHA loan. You must be able to meet the requirements given below.

  1. You must prove the 2 years of steady employment in the same line.
  2. Your credit score should be 620 or higher with fewer than two 30-day late payment in the past 12 months.
  3. keep in mind this loan is available only for primary residence occupancy.
  4. You must have some cash to pay the down payment on your loan.

2. Meet the FHA-approved mortgage near you

Ony federally approved brokers can offer these loans. To start this process you need to visit the authorized broker to get an FHA loan. You can search an FHA authorized broker through the official website of FHA mortgage loan.

3. Keep ready your money for down payment

Every home loan needs a down payment, in case of FHA loans a borrower cannot get the finance more than 96.5 percent. That means you can expect to pay 3.5 percent of the house cost up front.

4. Keep ready your documents

The documents such as employment status, saving, credit and your personal information. Remeber the documents you provide must be fair extensive.

Note: You must fill the correct details and documents in your loan application.

5. Have the property appraised

The property you are going to buy will be appraised. A lender or broker must be the person to order the appraisal on the behalf of the borrower. The appraisal cannot be ordered by the borrower.

6. Finish the loan transaction by signing the documents

Make sure that you have read everything before you sign the documents. Don’t feel afraid if you need any clarifications on anything you have doubts.

There are many approved lenders and approved brokers for FHA loan. You can apply for the FHA loan the process is free, easy and you can do it without any delay. You can approach any lender or broker for FHA loan and get the quote after that contact them directly. What Is An FHA Loan