Week 11: 5 Things Everyone Should Know About Loans

Almost all of our readers are likely to have at least one loan, whether it be a mortgage, school loan or auto loan. Although they are not necessarily bad to have, it is important to be selective when taking out a new loan. This week, we'll be sharing 5 things that we think all of our readers need to know about loans.

If you missed one of our previous newsletters, visit our archive below:

Personal Finance Guide Archive

This week's Activities for Success:

1) Complete the Debt to Income Ratio Calculator

2) Review any issues of Personal Finance Guide that you may have missed.

5 Things to Know About Loans

1) When considering an auto loan, shop around. Many people take out new auto loans directly from the dealer from which they purchased the car without first getting quotes from other lending sources (including their own banks).

2) Before considering a mortgage loan, know your credit score and your debt-to-income ratio (calculate this below).
An ideal debt-to-income ratio is below 35%.

3) If you are currently paying off student loans, remember that the monthly payment is the minimum that you need to pay. Increasing your payment by even 10% will allow you to finish the loan quicker and will reduce the total amount that you pay.

4) Before taking out a new student loan for you or your child, be sure to first apply for free Federal aid. Filling out the FAFSA (Free Application for Federal Student Financial Aid) could get you a piece of the more than $150 billion in yearly federal grants and loans, based on income.

5) You can refinance almost any loan. If you took out an auto loan 3 years ago and have since improved your credit scores, it is very likely that you could refinance that loan at a much lower rate. However, you usually cannot refinance a student loan, since you probably agreed to a set interest rate when you signed the Master Promisory Note.

We hope that these tips have helped you to learn more about loans. For more information, check out these articles:

Refinancing Your House and Reverse Mortgages

Four Different Types of College Loans

This week's Activities for Success:

1. Complete the Debt to Income Ratio Calculator

2. Review any issues of Personal Finance Guide that you may have missed.

Stay tuned for next week's issue, which will cover Review of Personal Finance Guide.
By InvestorGuide Staff

Copyrighted 2020. Content published with author's permission.

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