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If you are coming up a little short on funds to pay this semesters tuition bill, you may be looking for last-minute student loans to help fill the gap. Before resorting to high-cost private loans, make sure you have first exhausted all of your federal loan opportunities. Even if you didnt apply for financial aid because you thought you werent qualified, it might not be too late to qualify for at least an unsubsidized federal loan. Its also a good idea to check if your state provides its own student loan opportunities, which may offer better deals than other private loans (in Connecticut, for example, the CHESLA program offers fixed rate loans).
If a last-resort private loan turns out to be your only option, here are some important things to keep in mind:
- Private loans are usually more expensive than federal loans.
- Private loans require a credit check and rates are based on your credit worthiness, so you may end up with a higher rate than the low advertised rates.
- Interest rates on private loans are typically variable, meaning they can change with the market.
- Private loans often have additional fees, such as origination fees.
- Private loans most often require a cosigner; in many cases this may be a parent.
- Most private loans are not insured against death or disability, which means the cosigner is responsible for paying them back if something happens to the student borrower.
Before signing, you should ask about and make sure you understand the full cost of the loan, including all fees; terms of the variable rate, how it is calculated, and how often the rate changes (ie, quarterly, annually); and repayment requirements and options. Make sure to ask the following questions:
- What will the likely monthly payment be under various rate change assumptions?
- What is the total cost of the loan likely to be with all interest and fee charges included?
- Are there deferment options or hardship waivers?
- Are there consolidation options and how difficult will it be to consolidate after graduation?
- Does the loan offer penalty-free pre-payment?
If you still dont understand all the terms and obligations, ask more questions or seek the financial advice of someone you trust, such as a parent.
Its also a good idea to compare the rates and costs against competitors. There are comparison calculators online, such as the New York State Higher Education Services Corporations tool, which compares interest rates, estimated monthly cost and total costs assuming a $10,000 loan balance. If you are having difficulty finding a good tool or are still confused, you should contact your schools Financial Aid office for assistance.What to Avoid
Be aware of the red flags that may indicate youre looking at a predatory loan. Specifically, consider how much youre borrowing, the company youre working with and what kind of deals theyre offering you.
First, know when youre borrowing too much. Figure out the total amount you expect to borrow (including any federal loans) in order to complete your degree and make sure its an amount you can reasonably afford to pay back. Some financial planning experts suggest that you should not borrow more than what your annual starting salary is likely to be. So, for example, if you plan to borrow $50,000 for a two-year degree in Early Childhood Education, and your expected starting salary is likely to be no more than $30,000, you may be getting in over your head. Another rule of thumb is to compare your estimated monthly payment to your estimated monthly income. Aim to keep your loan payment (assuming you dont have other consumer debt) to no more than 10 percent of your income.
You also need to be wary if the lender does not appear on your schools preferred lender list. Find out why--there may have been issues with this lender or complaints about the servicing of the loan during repayment.
Lastly, remember that promises that seem too good to be true usually are. Some loan providers advertise very low rates, for example, but these are usually reserved for only those with the best credit ratings.
If youve already signed the paperwork but are concerned about the terms of the loan, most private student loan companies allow you to repay the loan without penalty. If thats not possible, its definitely a good idea to start paying off the interest or a small amount each month while you are in school to get a jump start on paying it back.
For every term or school year, think hard about minimizing the amount you borrow; avoid the temptation to take out the maximum the lenders are offering (up to 100 percent of the cost of attendance in many cases). Figure out whether you can get by with less or work part time to help offset the cost of books, transportation or other educational costs.
The bottom line is that you want to earn your degree with the least amount of loan debt possible. That may mean some sacrificing along the way, but it will pay off in the long run in the form of reduced overall debt and interest costs, and more manageable payments that will decrease the likelihood of defaulting on your loans.
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ATLANTA, Sept. 17, 2015 /PRNewswire-USNewswire/ -- The US Small Business Administration is reminding small businesses, small agricultural cooperatives, small aquaculture businesses and most private nonprofit organizations in Mississippi of the deadline to submit disaster loan applications for economic injury caused by severe weather and tornadoes on Dec. 23, 2014. The deadline to apply for a working capital disaster loan is Oct. 20, 2015.
Businesses that suffered economic losses as a result of the disaster and want to apply for low-interest loans from the SBA are urged to do so before the Oct. 20 deadline, said Frank Skaggs, director of SBA Field Operations Center East.
Low-interest disaster loans are available in the counties of Jefferson Davis, Lamar, Lawrence, Marion, Pearl River and Walthall in Mississippi; and Washington Parish in Louisiana.
Working capital disaster loans up to $2 million are available at 4 percent for small businesses, and 2.625 percent for private nonprofit organizations with terms up to 30 years. The loans are intended to pay fixed debts, payroll, accounts payable, and other expenses that could have been paid had the disaster not occurred. To be considered for this assistance, eligible entities need to apply by the deadline.
Applicants may apply online using the Electronic Loan Application (ELA) via SBAs secure website at https://disasterloan.sba.gov/ela.
US Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
The deadline to return economic injury applications is Oct. 20, 2015.
For more information about the SBAs Disaster Loan Program, visit our website at www.sba.gov/disaster.
Contact: Michael Lampton
Phone: (404) 331-0333
Release Number: 15-380, MS 14214
Logo - http://photos.prnewswire.com/prnh/20110909/DC65875LOGO
SOURCE US Small Business Administration
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Funding your start-up is seldom easy. Your options are limited.Friends and family members normally can only invest a small amount. Bank loans can be hard to come by. Government programs can take months to navigate. Small business owners may consider alternative and short-term lenders when cash gets tight. However, before doing so, you need to understand what you are buying.
As example, lets say that you are going to borrow $50,000. You only need the capital for one month and the small-business lender tells you it charges three percent. In most cases, this is three percent per month. In other words, if you borrow $50,000 for one month, you must repay $51,500 ($50,000 of principal plus $1,500 of interest).
If you need to extend for an additional month, it is another three percent. If you do that for a year (12 times), you would pay $18,000 in interest (12 times $1,500). However, $18,000 divided by $50,000 is 36 percent. Therefore, even if you only keep the loan for one month, you are paying an interest rate that is 36 percent per year. Of course, youll never hear one of these lenders say that they are charging you 36 percent. That rate doesnt sound attractive. Nevertheless, thats what it is. You wouldnt dream of paying that interest rate for a home loan or a car loan. Most credit cards offer better rates.
Related:Cash Crunch: Whats the Best Loan for Your Small Business?
This type of lending is very expensive. In short, almost any other loan you could get would cost you less. You could take a second mortgage on your home, refinance your automobile, apply for a new credit card or ask your Uncle John for a loan. Explore all of the other options before taking this type of loan. Its probable that any other option would cost you less, probably much less.
Another option isto bring money into your business by taking on a partner -- an angel investor. Sell part of your business to an investor to get the money you need. The popular show Shark Tank shows people trying to do this each week. If you follow this route, there are many precautions you should take, but thats another topic.
Suppose you have no other options. There are no viable investors. You dont own a home. Your car loans are maxed out and credit card companies arent interested becauseyour credit isnt good. If you literally have no other options, short-term or alternative lending might make sense. The key question is how long will you need to borrow the money?
If you will need money for the long term and there is no other source of capital, our best advice is to close down your business. Essentially no legal enterprise can deliver a return of more than 36 percent in the end. If your business doesnt deliver more than your cost of capital, you will eventually go out of business anyway. Facing that fact now will allow you to cut your losses.
Related:How to Save Your Business From Doom
On the other hand, if you truly need the moneyfor only a short time, it may be that such a loan will make sense. For example, you owe your suppliers money. They are refusing to provide the material you need to work until they are paid. Customers owe you money for work you have previously done. What you are owed is enough to cover your obligations and you believe that you will receive payment in the near future. In this case, a short-term loan, even at a very high interest rate may make sense because it allows you to keep working.
Be cautious, there are many lenders thatprey on small business people who have a dream, but are not financially sophisticated. In some cases, the rates are usury. Accepting such rates will cause you to dig a deeper hole in the long run. Nevertheless, there may be situations where these loans are appropriate.
Related:Applying for a Short Term Business Loan Online? These 4 Steps Can Protect Your Startup.
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The severe storms and flooding that hit the Lowcountry on Aug. 30 and 31 have been declared a disaster by the federal government at Gov. Nikki Haley#x2019;s request, clearing the way for low-interest disaster loans from the US Small Business Administration, SBA Administrator Maria Contreras-Sweet said Friday.
Residents and businesses in Berkeley, Charleston, Colleton, Dorchester and Georgetown counties can apply for the loans, with interest rates as low as 1.875 percent for homeowners, 2.625 percent for nonprofit organizations, and 4 percent for businesses. Loans carry repayment terms of up to 30 years.
Loans up to $200,000 are available to homeowners to repair or replace damaged or destroyed real estate. Homeowners and renters are eligible for loans up to $40,000 to repair or replace damaged or destroyed personal property, according to Frank Skaggs, director of SBA#x2019;s Field Operations Center East in Atlanta.
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Purchasing or renovating real estate can be an exciting part of growing your small business. But it can be tough to get approved for commercial real estate loans through a traditional bank. Online lenders offer some good options.
In general, your small-business loan should cost less than the projected profit from your real estate purchase or renovation. Moreover, because real estate is a large, longer-term investment, you'll want a loan that has a repayment term of at least two or three years to keep your monthly payments lower.
But if you have the opportunity to buy real estate at a discount, then getting a loan quickly becomes a priority, and the lower cost of the property will mitigate higher loan costs, says Ayush Kapahi, co-founder of CityFunders, a real estate crowdfunding platform based in New York City.
Below, NerdWallet has examined some options for purchasing or renovating real estate. It's important to carefully weigh the terms, interest, fees and speed of funding before making a decision. Compare fees and other factors on the NerdWallet small-business loans page.For purchasing real estate: SmartBiz and Fundation
SmartBiz is a good option if you're an established, profitable business. The lender originates SBA loans much faster than banks. Loans of $151,000 to $350,000 can be used for real estate purchases, General Manager Evan Singer says. If you a larger business with at least three employees, consider Fundation, which provides loans of up to $500,000.