6 Actions to Take to Save $1000 on Your Student Debts

Completing your college education can make you feel excited and liberated. However, this also means that you have to start repaying your student loan. This is a huge responsibility.

If you can plan early enough, you can not only save a lot of money on your student loans but you can make the transition with minimum stress. Here, you will find some actionable tips that can help you save money on your student loans.

Take advantage of the grace period

After you’ve just graduated, you have about six months before you are required to start repaying your student debt. While you may think that this is a good deal, the loan will become more expensive if the period elapses before you have cleared the loan. if you took a loan with government subsidies, you have the opportunity of paying the principal amount without interests as long as you pay within the grace period.

On the other hand, unsubsidized loans accrue interests from the instant you get the money. Although the lender doesn’t require you to make the payments immediately, the interests keep on growing. As such, you may want to repay the interests during the grace period. This lowers the amount you owe since your progressive payments will go towards settling the principal amount.

Consider an income-based repayment program

If you are facing genuine hardships with making the required payments on your student loan, an income-based repayment plan can help you out. Generally, these plans will limit your payments to only 15% of your annual income and at the same time, your term will be adjusted to 25 years. After you make payments for this period, any amount that is outstanding will be canceled.

However, this method is only appropriate for people who can’t afford the monthly payments. This is because you might end up paying a lot of money in interests, but it lower than you would have paid if you defaulted the loan.    

Besides the forgiveness that comes after 25 years, you can still benefit from other programs that cancel your loan sooner. One such program is the Public Service Loan Forgiveness and it grants forgiveness to people working in government agencies and non-profit organizations. However, you must have worked with them for at least 10 years. In addition, there are programs that benefit lawyers, doctors, and teachers.  

Set up automatic payments and surpass the minimum requirement

By signing up for automated payments, your creditor can offer you a discount on the interest you are supposed to pay. While the figure may appear small, it can translate into huge savings after several years. Besides, you won’t have to face the stresses of late payments.

If you can afford to pay more, do it. While this may take more of your available resources, you can save a lot of money in interests since the debt will be cleared sooner. To illustrate, if your loan stands at $50,000 and the interest rate is 6%, making at least $100 extra payments per month can save you more than $3,000. In addition, you’ll clear the entire amount two years earlier than scheduled. With most student loan providers, you will not be charged prepayment penalties so there are no additional costs.

Student loan consolidation

Student debt consolidation has gained popularity with graduates who have more than one loan. Basically, this option takes all your outstanding debts and they are combined into one. Instead of dealing with multiple loans which come with different interest rates, you’ll have a single loan with a defined interest rate. While the loan amount will appear higher, you will end up saving several thousand on your student debt in the long-haul.

However, this method is most beneficial to people with a good income and outstanding credit history. For instance, if your total student debt stands at $200,000 with an interest rate of 7%, its possible to refinance the loan at 4%. But this is only possible if your credit scores are high. You should also understand that by using this option, you will no longer be eligible for IDR options as well as loan forgiveness.

Find a creditworthy cosigner

When you apply for a student loan with a creditworthy cosigner, you are setting yourself up for easy approval and you also benefit from lower interest rates. Basically, most lenders will determine the interest rates for realistic loans based on the credit scores.

However, you should bear in mind that your cosigner is viewed as a co-borrower and they bear an obligation to settle the outstanding debt. At the same time, all the defaults and delinquencies will be reflected on the credit report of all parties. However, there are lenders who can offer cosigner release after making about 48 payments on schedule.  

Use extra income to pay the loan

If you want to eliminate the debt earlier, you can make additional payments using any extra income that comes your way. The idea here is to minimize the interest you will be paying by the end of the repayment cycle. However, this option will be more suitable for people earning a high income since they have more money to meet other financial responsibilities.

On the other hand, this option also means you will forgo the option of getting loan forgiveness since you will have eliminated the debt before you can qualify for the program. As such, if you are certain that you don’t have to pay the entire amount; this might derail your plan.

While student loans may seem like a heavy burden, you can eliminate the debt and save some thousands in the process. It is not only important to start making the payments early but it is also crucial that you remain diligent on your payments. While there are numerous ways to help you save on your student loan, you need to stay focused on eliminating the debt. By using the tips in this article, you can increase your chances of becoming debt free and embark on other goals that contribute to financial freedom.  

4 Alternative Financing Options for Small Businesses

Traditional financing is hard to come by when you run a small business. Banks often require an excellent credit history and at least two years in business. According to a report from Biz2Credit, less than 25% of small business loan requests were approved by big banks in March 2016.

Alternative forms of financing can help small businesses obtain the funds they need to grow and thrive. Here are four alternative financing options for small businesses.

1. P2P Loans

Peer-to-peer lending allows businesses to borrow money from their peers rather than a single lender. A banking platform may approve the loan to go live for bidding, but the funds will come from ordinary people who want to make an investment in your business.

To start the process, businesses must fill out an application. The platform then assesses the business’ credit risk and applies an interest rate to the profile. Investors can then view the profile of the borrower and determine whether they want to invest. Businesses with good credit generally have better luck with P2P loans.

P2P lending rules vary from state to state. The practice is legal in all U.S. states aside from Ohio.

2. Crowdfunding

Similar to P2P lending, crowdfunding allows businesses to raise money from their peers. There are four types of crowdfunding: rewards, debt, charity and equity. Platforms like Kickstarter and Indiegogo generally use rewards crowdfunding, while GoFundMe is more focused on charity.

With rewards crowdfunding, the business doesn’t have to pay the money back. Backers are sent something in return for their donation. With equity crowdfunding, those who invest in the business receive a share of the business or product.

Crowdfunding is often used by startups looking to launch a new product or service, small businesses looking to expand and creative professionals looking for funding for a project.

There may be fees associated with the crowdfunding platform.

3. Lines of Credit

A business line of credit can be obtained from a bank or an online lender. Unlike a conventional loan, a line of credit gives you access to a sum of money that you can draw from at any time. Businesses are only charged interest on the amount of money that is withdrawn.

Lines of credit work similarly to a credit card.

If your business is in need of working capital or extra funding to cover expenses during a slow season, a line of credit may be a good option.

4. Invoice Factoring

Invoice factoring is different from other forms of lending. Invoice factoring companies purchase your business’ unpaid invoices at a discount and you receive the majority of the money upfront. The client pays the invoice, and the factoring company sends you a second installment (less the factoring fee).

The factoring fee is a percentage of the total amount of invoices that are being factored. Typically, the factoring fee for 30 days ranges from 1.5% to 4.5%.

Invoice factoring is appropriate for businesses that have unpaid invoices. Bad credit isn’t normally an issue with this form of lending, as the factoring company is more concerned with the client’s ability to pay – not yours.

 

 

 

 

4 Things to Think Through Before Consolidating Your Debts

Debt consolidation can be a Godsend, especially when you are drowning in debts. Once you consolidate your credit cards, your line of credit, and any other loans that you may have, into a lump sum, there will only be one affordable payment that you may have to make each month and at a low interest rate.

However, it’s imperative to understand exactly what you’re getting into, before signing on the dotted line and consolidating your debt. So here are a few things for you to keep in mind before you seal the deal with your debt consolidator:

Check if you are actually benefitting by consolidating your debts

Go for debt consolidation only if there is an actual benefit. You may have to do your math to find this out. But it is quite simple. Just add up all the payments that you are making currently towards your credit cards and loans. Find out how much you will have to pay if you consolidate them all. Now analyze the difference between these amounts. Here’s a debt calculator tool to help you do the math. If the margin is high and if you are saving a significant amount by consolidating your debt, it makes sense to go this route.

See if you can reduce your expenses

Too much debt can be a result of excessive spending. Get an account of your expenses by creating a budget analysis and you can then find easy ways to cut some of these expenses out of your life. Although you may not be able to do much about your fixed and required expenses, like your electric bill and mortgage payment, you can reduce overspending on entertainment related expenses. See if you need to do away with any of your old habits. Differentiate things based on your needs and wants. If you are serious about repaying your debts, you must make sure you won’t go back to your spending. This is when debt consolidation might work for you.

Research your options

You can choose from different ways to consolidate your debts. There are secured loans and unsecured loans. You can pool your debt on a balance transfer credit card or you can just transfer your outstanding debt onto a new line of credit. Some of this may involve high upfront costs or origination fees.

Apart from debt consolidation there are also other debt relief methods you can choose from. For instance there is debt settlement where you get to settle your debt for less than what you actually owe. You may want to consider the benefits and drawbacks of your options before making your decision.

At Golden Financial Services, their California Debt Relief office does a great job at explaining each debt relief option and showing you the benefits and downsides associated with each plan.

Try negotiating with your creditors

If you are going through a tough financial situation you can approach your creditors to make things easier for you to repay your loan. In case you have established good relationships with them they may even agree to reduce the interest rate or increase the term of your loan, thereby reducing your monthly payment. If this doesn’t work out, you may even ask them to suspend your payments for a few months until your situation improves. Here are step by step instructions on how to negotiate with your creditors on your own and get them to reduce the interest rate and monthly payments.

If debt consolidation is the path you choose, make sure that you only consolidate the debts that have a high interest rate. You can always pay off the low-interest debts on your own. And always check whatever company you’re working with, at the Better Business Bureau, on Yelp or TrustedCompanyReviews.com.

Bankruptcy Benefits You Want To Know More About

When you declare bankruptcy you go through a highly emotional moment. Stress will pile up and what you do is going to affect your self-image, reputation and future credit. Every person that files for bankruptcy goes through the struggles of rebuilding credit while loan securing becomes a challenge. Lifestyle changes happen and you are faced with a rollercoaster of emotions. However, this does not mean everything will be bad.

What many do not realize is that bankruptcy also has some serious advantages. They do offer relief if you are faced with debt. You can avoid the letters and phone calls that demand payments and the entire process is nowadays much simpler than it used to be, especially when hiring an experienced bankruptcy attorney. In order to offer the information you need, remember that bankruptcy filing brings in the following important advantages:

  • Older liabilities (those that are over 3 years old) will go away.
  • Repossessions, missed debt payments, lawsuits and defaults that could hurt credit score more are avoided.
  • You can start rebuilding credit sooner rather than later.
  • While student loan debt cannot be eliminated, bankruptcy will stop lenders form using their aggressive collection actions.
  • The fact that you will lose credit cards is actually an advantage since this removes the appeal of using them and ending up in more debt.
  • You get a new start as you face the reality you are bankrupt.
  • You avoid the embarrassment of having to go through dunning letters, phone calls from your creditors, cancelled CC cards and declined authorizations for credit charges.
  • You avoid having your name listed in the papers or in court records because you are sued.
  • You can still obtain loans from lenders that are specialized in dealing with people in your situation.
  • State exemptions will allow you to avoid the situation in which several owned items will be repossessed.
  • Trustees and judges surely heard stories that are way worse than yours and the fact that you file for bankruptcy means you take responsibility. This can actually give you preferential treatment.

Final Thoughts

As you can see, filing for bankruptcy is not a bad thing. In fact, in the event your experienced bankruptcy lawyer recommends it, this is exactly what you should do. There are so many situations in which bankruptcies proved to be the best thing that happened to someone, simply because it offers a brand new financial start. It is tough but it is much easier than having to deal with fighting a constant bad financial situation without having any real way of getting out of debt.

The only thing that does need to be added is that it is really important to hire a highly experienced bankruptcy attorney. His/her help will be really valuable as you are 100% sure all documents are properly filed and you are represented in front of authorities. Whenever you look for a bankruptcy attorney, always hire the best one you can find. This is the smartest thing you can do to get you back on track.

3 Tips for Balancing Your Savings and Paying Down Debt

Choosing whether to save or pay off debts can be a difficult decision. Saving money for a rainy day or retirement seems like a top priority, but will your debts linger on for years to come? 

Managing debt and maintaining savings is tailored to each individual, and different strategies can be implemented in helping to achieve your goals. Here are three tips on how to maintain a balance between paying down debt and saving.

Learn to Budget

The first step to managing your finances better is learning how to budget. Knowing your expenditure can seem like a scary thought at first, but creating a budget helps to prioritize financial obligations.

Start with your monthly income after tax, and then list your expenses. According to Certified Financial Planner, Jeff Rose, it’s best to separate your expenses into three categories.

  • Fixed: rent and debt repayments (these expenses are necessities).
  • Variable: groceries, travel expenses and utility bills (expenses that can be adjusted).
  • Optional: expenses that aren’t necessary, such as going to the movies, out to restaurants or on vacation (expenses that you can live without).

Breaking down expenses into categories helps identify optional expenses. By reducing them, you’re saving money.

Refinancing Debt

Gather information and find out the total amount owed, the interest charges, and the terms of the loans like how long you have to pay. 

Student loan refinancing can be one of the most effective ways to lower your monthly outgoings and help make your finances more manageable. Refinancing is essentially applying for a private loan at a much lower interest rate, and that could potentially save you thousands of dollars. Refinancing companies tend to be strict in terms of eligibility. Most lenders will want to see a steady stream of income, ability to manage finances, and good credit history.

Paying Down Debt First

Now that you have an idea of where you can free up some cash, it’s time to prioritize paying down larger debts first and paying the minimum towards debts with lower interest rates.

Donald Hammond, MBA, CFP, and executive vice president at Maritime Financial Group suggests:

“List your debt from the highest interest rate to the lowest. Pay off the highest-interest cards and loans first, paying more than the minimum each month. Continue to at least make minimum payments on the rest. Work your way down until everything is paid off.”

With this method, Hammond suggests to get more aggressive on larger debts with higher interest rates. For example, paying $400 towards a credit card with an interest rate of 17 percent is going to be more effective than paying down a credit card with an interest rate of 7 percent. 

You Can Do It

Saving for the future and paying down debt doesn’t have to be mutually exclusive. Establish a budget, and you’ll get a clear picture of which outgoings can be tweaked to save money. The methods listed above are a strategy to chip away at your debts, maintain savings, and bring you one step closer to becoming debt-free. 

5 Ways to Get Out of Debt

If you’re in debt, you’re not alone. About 8 in 10 people are in debt, and many will die with debt still hanging over their heads. Debt is something to take seriously and, if you clicked on this article, you know it’s time to do something about it. Getting out of debt isn’t easy, but it will be well worth it. You wouldn’t want to spend the rest of your life with debt, so it’s time to take action. You can defeat your debt if you take the necessary steps. Here are five ways to get out of debt.

Invest

Investment isn’t just for the wealthy. Your debt places an added financial burden on your shoulders, so it’s even more important that you take care of your future now. Open a retirement fund, and research stocks to buy. A stock market investment isn’t a good way to make money for tomorrow, but it’s an excellent way to make money for twenty years from now. Start taking care of your future by earning retirement money. It won’t hurt your situation to have money on the side. If you invest responsibly, you could ease some stress off your future shoulders. If you do choose to invest, look into socially responsible investing, and make sure your investments are as good for the world as they are for you.  

Budget

Budgeting might sound like a huge pain. It might also sound like “one of those things” you never seem to stick to. We all fail to complete our exercise routine every week, or keep our house as clean as we’d like. A budget, however, isn’t something with which to gamble. Do whatever you have to do to keep yourself accountable, and start budgeting with great care. If you’re afraid a budget will scare you every time you spend money, don’t worry. A good budget does the exact opposite. If you budget right, you’ll feel good about the money you spend, because you know what you can afford each month. Put a percentage of your income aside into savings, college loans, debt payment, or grocery budget. Once you know your limits, you’ll feel freer.  

Make Smarter Payments

If you’re late paying off your credit cards, you earn a higher interest. Do as much as you can to keep your interest rate low. Treat your credit card like cash; don’t spend money that isn’t in your bank account. Your budget helps with that. If you can pay every month’s bill one hundred percent, you’ll earn a better credit score, and you’ll stop adding new debt. As you attempt to pay off your cards, try to make double payments, or at least pay off more than you must every month. That added payment is interest free, so you’ll save yourself a great deal of money if you pay off more in a shorter period of time. Your goal should be to live on as little money as possible, and pour as much of your income as you can into alleviating your debt, today. If you find that you need a better income stream, make the right moves towards a better career. Check out places like NYADI in Jamacia, NY, or look into online degrees, to start pulling a better income now.

Break Expensive Habits

If you’re like most people, you spend a couple hundred, or thousand, each year on various habits. Whether it’s something innocent, like a soda per day, or something more serious, like cigarettes, letting go of unhealthy habits saves you in the long run. If you stopped buying cigarettes, you’d save several thousand dollars each year, even if you switch to vapes instead. While it’s always better for your health to eliminate tobacco altogether, you’ll save money by using a vape mod and ejuices. Even cutting back on unhealthy eating, like frozen dinners or soda, saves you a great deal every year. Water is free, and you’re not doing your health any favors by drinking soda often. If you want to eliminate debt, once of the first steps is a lifestyle change.

Downsize

A budget and simple lifestyle changes may not be enough to solve your financial woes. If you need to take action about the amount of debt you owe, consider a serious downsize. If you live in a nice house, and you have a hard time paying off your debt, it might be time to move. An apartment or smaller house might feel like a culture shock to you, but downsizing is worth it, if it eradicates your debt. In fact, people who live in smaller houses tend to be happier. Getting rid of your stuff and living a more simple life might be the solution for you. It’s good for your bank account, and it could be good for you as a person, as well.

A life with debt is stressful. With debt, you’re more prone to worry, and it often feels like your freedom has been removed. You can’t do what you love with the threat of debt hanging over your head. Even simple purchases feel catastrophic. You deserve to live a better life. Start purging yourself of consumer tendencies. You don’t need the best phone. You don’t need a bigger house. What you do need is a meaningful life, and part of that meaning starts with living debt free. You deserve the freedom to travel, buy a dinner out once and a while, and enjoy peace of mind. None of those things are easy, or even smart, with debt in your life. Don’t leave your future up to chance, a windfall, or a better job. Start making moves today to eliminate your debt.

Secondary Mortgage Market in GTA – Weighing the Pros and Cons

Home sales in the Greater Toronto Area (GTA) have decreased this year compared to last. The Toronto Real Estate Board reported that sales were down almost 35 percent in February 2018 compared to February 2017. In addition, prices have dropped, with the average sales price falling 12.4 percent for all housing types.

As 2018 moves forward, buyers are getting used to the new mortgage rules and the government regulations that went into effect on January 1 of this year. Home buyers are adjusting to the new housing market measures and have had to recalibrate their plans because of the higher interest rates and new mortgage stress testing guidelines.

What that means is that realtors have to be creative if they’re going to make sales in this market.

For both buyers and realtors, the secondary mortgage market can provide an alternative to traditional bank mortgages, one that in many instances, should be considered. Obtaining a mortgage from an alternative lender is frequently easier and quicker than getting a traditional mortgage. While it is true that buyers often need to have a larger down payment, and the loans are generally more expensive, the secondary mortgage market can provide a solution for buyers who are looking for a different course of action and for realtors who want to help their clients.

One of the great advantages of the secondary mortgage market is that it can provide a short-term solution for buyers who can then, at a later date, make different arrangements, perhaps through a traditional bank mortgage.

For example, a GTA home might have been selling for $1.4million a year ago, and today that same home will likely go for $1.05 million. If a buyer is putting 25 percent down, they will carry a mortgage of $787,500. Most secondary mortgages have a duration of one year or less. So, at 8 percent per year, the buyer is paying in one year 4 percent extra on the mortgage, or $31,496. That means effectively that the property costs an extra $31,496. That’s not really significant since the buyer could close in a buyer’s market that’s discounted. In a year’s time, the buyers can investigate refinancing with a traditional bank mortgage, and will hopefully be in a much better situation.

Realtors who want to guide buyers towards the secondary mortgage market should exercise caution, however, and recommend alternative lenders only to those buyers who can carry such a mortgage and have the financial resources and income ability to refinance within a year.

I would also recommend that GTA realtors who are interested in offering advice about the secondary mortgage market establish direct relationships with alternative lenders rather than with mortgage brokers; brokers will often charge substantial fees, which can add to the costs incurred by the buyers.

Although sales in the GTA market have taken a downturn, there are still a number of ways for both buyers and realtors to take advantage of the market conditions.

Borrowing Money with Poor Credit

It can be extremely frustrating to have bad credit. Even if you are responsible with money now, poor decisions that you made in the past can make it so that you are treated like someone who is not. However, all hope is not lost in this situation, as you will still be able to take out certain types of loans even with a lower credit score. Generally speaking, short-term loans are more available to people with poor credit than are more traditional types of loans.

However, it is important to keep in mind that these loans are not better in every way just because they are more available. If you do not meet the specifications to get the loan on your own, you will often need a cosigner in order to be able to borrow the money. Essentially, because your credit score marks you as a risk to the lender, they need to have someone with a higher credit score held responsible for paying them back if you end up defaulting on the loan. In order to find the right cosigner, you will need to find someone who is willing to help you out with this and who has a credit score that is high enough for the lenders to accept (if the cosigner’s credit score is also too low, the loan will be denied).

Additionally, you should be aware that if you are borrowing money with less than perfect credit, you should anticipate quick cash loan rates to be higher than other types of loans. Lenders of these types of loans do this because, again, you are considered more of a risk if unable to show a strong credit history, and they stand to lose less if they put a higher interest rate on your loan. You should make sure that you are able to make the repayments with the higher interest rate, and that you are able to fit all of the interest that you will have to pay on this loan in your budget during the repayment period.

However, there are also positive aspects to borrowing money with less than perfect credit. Using loans to build credit is always a possibility. If you are able to take out the loan and successfully pay it back over time as promised, this will improve your credit score and make it so that you may have better options in the future if you ever need to borrow money. With a higher credit score, you will be able to consider more types of loans that you are able to borrow, in addition to ones with lower interest rates that are available to people with good credit. In this way, you can use this experience to prevent your current credit situation from limiting your loan options in the future.

As you can see, there are many things to keep in mind when you are borrowing money and you do not have good credit. You should make sure that you are able to pay back the loan before you enter into the agreement, as if you end up defaulting on the loan, this will lower your credit score even more and make it so that you end up with even fewer options the next time you need to borrow money. Additionally, this will put you into even more debt with the additional late fees and interest that you will have to pay. Overall, when you are taking out a loan, make sure that you are responsible and plan ahead.

Why More Canadians Are Retiring With Debt and What It Means

As Canadians, we live in a country where certain rights and freedoms are expected, hoped for and, some might say, taken for granted. The freedom to retire early is one many of us begin grappling with as we approach middle age. Ironically, many Canadians won’t be ready to retire until they are significantly older.

The reason? Debt.

Unfortunately, too many retired people – 34% — over 55 years old still carry consumer debt, according to Statistics Canada. In fact, a recent Equifax Canada report found that the debt load of seniors is outpacing that of their younger counterparts.

It’s not as though Canadians have always carried a heavy debt burden. In 2012, 42.5% of people over 65 still had debt, a jump of 55% when compared to seniors in 1999.

A number of economic, social and cultural factors are to blame, say experts. They point to divorce, illness and large mortgages as some of the culprits. Experts also explain that children, grandchildren and other family members may also be at fault, as they often look to their parents and grandparents to lend them hand. In fact, a 2015 survey showed that 18% of first-time home buyers are gifted their down payments thanks to relatives, typically parents.

But, children can’t shoulder all of the blame.

Low interest rates have made debt much more attractive. Further, cottages, pricey vacations, fancy cars and other expensive toys may be out of reach for the average pensioner. Paring down and cutting back in your sixties may not seem fair. After all, you’ve worked decades, aren’t you entitled to a little luxury? Your fixed retirement income simply may not support your lifestyle any more. Perhaps it’s time to downsize and sell your 3,000 square-foot home?

If selling isn’t an option, many house-rich, cash-poor seniors can look to their houses for equity. Often by the time a person retires, he or she has either paid off their mortgage or is only owing a small amount. Because house values have increased in recent years, in some markets quite significantly, tapping into a home’s equity may be something to consider.

Still, as a borrower, you need to be aware of how you are intending to pay back the loan. Is it possible to make monthly payments or would you prefer to have your estate pay off the loan after you die?

No matter how the money is borrowed, the process should be well planned out. Know what you need it for. Have a repayment plan in place. Don’t borrow more than you need – that often leads to trouble.

Dwayne Rettinger

Executive Financial Consultant

Investors Group Financial Services Inc.

Rettinger & Associates Private Wealth Management

www.rettingerandassociates.com

This is a general source of information only. It is not intended to provide personalized tax, legal or investment advice, and is not intended as a solicitation to purchase securities. Dwayne Rettinger is solely responsible for its content. For more information on this topic or any other financial matter, please contact an Investors Group Consultant.

6 Must-Know Things Before Applying for a Jumbo VA Loan

If you are veteran of military or reserves or National Guard, your dream to have a primary home is one step away. The United States Department of Veterans Affairs (VA) guarantees a VA loan, which is a mortgage loan entitled to American veterans, spouses in case not divorced and reservists. The Department of Veteran Affairs also provides many other facilities such as healthcare services, help with loans and insurances and a Jumbo VA loan is one among them. As such, the VA doesn’t provide you with the loan amount; it facilitates the same with help of lender companies. Here in this article, we have tried to enlist six must-know things before you apply for a Jumbo VA loan.

1. Eligibility criteria

Not everyone can apply for a Jumbo VA loan. The Department of Veteran Affair has clearly laid ground rules to establish the eligibility criteria. The members of the military, a retired veteran, spouses of the personnel who served America and have not remarried after the death of husband and employees of the reserves or National Guard are considered to be eligible. The veteran must have served in the military for at least a period of six months or more, while the employees with service in National Guard or reserves must have done at least 6 years of service to be eligible. During wartime, the period of eligibility for the veteran military is considered to be around 3 months. So first step you have to take is to find whether you are eligible or not. You can also get an online eligibility certificate before you start the application process with all your relevant documents ready.

2. Loan and down payment amount

Generally, the counties have set a limit of $453,100 as a VA loan amount and anything beyond that is classified as a VA jumbo loan. In case of a VA jumbo loan, the borrower needs to pay a lump sum amount of around 25 % on the amount greater than $453,100. However, in some county areas where the prices of housing are too high, the down payment amounts are kept lower.

3. How can you use a Jumbo Loan?

A Jumbo VA Loan cannot be used like a personal loan or a traditional bank loans against any line of credit. The purpose of a Jumbo VA Loan is clearly set to fulfill the need for a primary home for a veteran. This amount hence cannot be used for buying or building a vacation home.

4. Funding Fees

A funding fee has to be paid by the borrower for the loan amount greater than $453,100 or as set by county till $1,000,000. The fee thus becomes less when you offer a down payment amount. Generally, veterans pay around 25 % of the amount as the down payment amount.

5. Interest rates

While the VA or the loan lending companies don’t take into consideration any past credit history or bankruptcy yet having a good credit score helps in getting lower interest rates. Normally a credit score of above 610 or 620 is considered to be okay but even a poor credit score doesn’t cause the rejection of Jumbo VA loan. If the veteran is in a job or has a recommendation from someone who has a good credit score, the lending companies are more than happy to carry forward the entire process.

6. Other advantages

Generally, a VA counselor tries to assist in case the veteran finds it hard to pay back the entire amount and a situation of foreclosure homes. There are hotline numbers to call for getting a VA jumbo loan and application can be filled online which makes it easy for veterans to start the loan process.

Conclusion

In the end, a Jumbo VA loan should be utilized by the eligible applicants due to the advantages it offers. Make sure to read the offer and documents carefully before applying for the loan. For example, be aware of the closing costs, interest rates and other terms and conditions.