Beyond the Classroom. Blaise P. Johnson Gate City Bank

Transcription

1 Beyond the Classroom Blaise P. Johnson Gate City Bank 1

2 Topics To Be Discussed 1. Credit Reports & Credit Scores 2. Repayment/Consolidation of Student Loans 3. Obtaining A Personal or Home Loan 4. Open Questions Stump The Banker 2

3 Credit Reports 3

4 Credit Reports 1. What is a credit report 2. Where do credit reports come from 3. Who is allowed to see your credit report 4. What information is on your credit report 5. How can I get a free copy of my credit report 4

5 What Is a Credit Report 1. History of your past credit activities 2. Lists any loans or credit cards you have had, the balances and how regularly you make payments 3. Also shows if any action has been taken against you because of unpaid bills 5

6 Where Do Credit Reports Come From 1. A consumer reporting agency (CRA) which is a company that gathers and sells credit information 2. Most common type of CRA is the credit bureau 3. There are 3 major credit bureaus operating nationwide (Experian, Equifax, TransUnion) who provide the majority of the credit reports 6

7 Who is allowed to see your credit report? 1. Creditors who are considering granting or have granted you credit 2. Employers considering your for Employment, Promotion, or Retention 3. Insurers considering you for an Insurance Policy or Reviewing an Existing Policy 4. Government Agencies reviewing your financial status 5. Anyone else with a legitimate business need for the information (potential landlord) 7

8 What Information Is On Your Credit Report 1. Identifying Information: Name, aliases, address, social security number, birth date, employers, etc. 2. Credit Information: Accounts you have with banks, retailers, credit card issuers and other lenders including type of loan, date account was opened, credit limit, payment history, etc. 3. Public Record Information: State and County court records on bankruptcy, tax liens, or judgments 4. Recent Inquiries: Names of those who have obtained copies of your credit report in the last year 8

9 How Can I Get a Free Copy of My Credit Report 1. You are entitled to one free credit report from each of the nationwide credit reporting companies every 12 months 2. For your free report go to the web site: 9

10 Credit Scores 10

11 Credit Scores 1. What Is A Credit Score 2. How is My Credit Score Determined 3. What Does My Score Mean 4. How Can I Get My Credit Score 11

12 What is A Credit Score? 1. Credit Scores are numbers assigned to you based on your credit history. 2. Are often called FICO Scores (Fair Isaac & Company). 3. Scores generally range from 300 to 850, with the higher the score the better risk you are. 12

13 How Is My Credit Score Determined? 1. Information obtained from credit report is analyzed. 2. Payment history; do you make payments on time (35%) 3. Amounts owed; number of accounts with balances (30%) 4. Length of credit history; how long have you had credit accounts opened (15%) 5. New credit; number of new accounts opened recently (10%) 6. Types of credit used; number of credit cards, retail accounts, mortgage loans (10%) 13

14 What Does My Credit Score mean? 1. Superb (820 and up) Rank: god/goddess 2. Excellent (775 to 819) Rank: emperor/empress 3. Very Good (740 to774) Rank: king/queen 4. Good (710 to 739) Rank: governor 5. Decent (675 to709) Rank: mayor 6. Fair (625 to 674) Rank: principal 7. Shaky (600 to 624) Rank: store clerk 8. Poor (550 to 599) Rank: busboy 9. Bad (480 to 549) Rank: bum 10. Terrible (below 479) Rank: leper 14

15 How Can I Find Out My Credit Score? 1. Credit Report Agencies; for a fee 2. is what I use 15

16 STUDENT LOAN REPAYMENT 16

17 Repaying Student Loans 1. Amount Owed 2. Type of Loans 3. Lender 4. Interest Rate 17

18 What happens when your loans enter repayment? 1. Repayment begins after the grace period 2. Unpaid accrued interest is capitalized 3. Lender must 1) establish repayment start date 2) establish first payment due date 3) disclose repayment terms 4) offer choice of repayment options 18

19 Things to consider before repayment begins? 1. Pay outstanding balance in full 2. Pay accrued interest before it is capitalized 3. Make a lump sum payment then pay the balance in regular installments 4. Make regular installments on the entire outstanding balance 5. Consider repayment options 6. How and when to make payments 19

20 Repayment Options 1. Standard 2. Graduated 3. Income-sensitive 4. Income-based 5. Extended repayment schedule 1) Applicable if all loans borrowed on or after and loan balance is $30,000 or more 2) Payments maybe standard or graduated 20

21 How long do you have to pay off your loans? 1. Generally 10 years 2. Up to 25 years if eligible for extended repayment schedule 3. Up to 30 years if choose to consolidate 21

22 LOAN CONSOLIDATION 22

23 What is Consolidation? 1. Combines federal education loans into one new loan with a single monthly payment 2. Private loans are not eligible for federal consolidation 3. Offered through Direct Loan program administered by Federal Department of Education 23

24 Eligible Loans 1. Federal Stafford 2. Federal PLUS 3. Federal Consolidation Loans 4. SLS and 5. FISL 6. Perkins 7. Health Professions Student Loans (HPSL), including Loans for Disadvantaged Students (LDS) 8. Nursing Student Loans (NSL) 9. Health Education Assistance Loans (HEAL) 24

25 Why Consolidate? 1. Convenience all of your federal loans are with one lender 2. Lock in a fixed interest rate 3. Longer repayment term 4. Cleaner credit report 5. No fee to consolidate 25

26 What are the drawbacks? 1. Once loans are consolidated, they cannot be unconsolidated 2. Longer repayment terms means more interest paid over the life of the loan 3. Borrower repayment benefits could be lost 26

27 What will my interest rate be? 1. Weighted-average of underlying loans 2. rounded up to the nearest 1/8% 3. not to exceed 8.25% 27

28 When Can I Consolidate My Student Loans? 1. During your grace period or deferment 1) You will lose any remaining grace period by consolidating during this time 2) Variable interest rates are lower during this time, which may make the rate on your consolidation rate lower 2. Once loans have entered repayment 28

29 Federal Consolidation Loan The Bank of North Dakota (BND) stopped making Federal Consolidation Loans because of drastic revisions and cuts to federal student loans as a result of the College Cost Reduction and Access Act of If you are considering a loan consolidation, you should contact BND. Depending upon the type of loans you have and the reasons you have for consolidating, there may be other options available to meet your goals. Contact BND at ext to learn more about your current loan repayment choices or to get information about the Federal Direct Loan Consolidation program offered by the Department of Education. US Department of Education Consolidation Department Direct Loan Servicing Center PO Box 1723 Montgomery, AL

30 Private Student Loan Consolidation Private student loans are also commonly referred to as Alternative Loans or Non-Federal Loans. Some of the most commonly used in this region include: DEAL (Dakota Education Alternative Loan) Bank of ND No Fee Education Loan US Bank Citi Assist Loan CitiBank Collegiate Loan Wells Fargo Consolidation may not always be the best option as Borrowers may be able to get extended repayment terms and lower payments through their current lender. Students can contact the Bank of ND directly at for student loan questions on Monday through Friday from 8am-5pm. 30

31 Managing Repayment 31

32 Payment Option Comparison Standard Graduated Standard 10 Years Extended 25 Years Extended 25 Years Income Sensitive Income Based Consolidation 30 years Monthly Payment $345 $208 $173 $179 $206 $266 $347 $175 (must cover interest) $109 $197 Total Interest Paid $11,428 $32,466 $40, $40,947 Cumulative Payments $41,428 $62,466 $70, $70,947 Repayment of $30,000 at 6.8% Interest $25,000 Income 1 person in family size 32

33 Repayment Plan Tips 1. Choose a plan that pays your loan off quickly 2. Remember longer repayment plans equal more interest costs over time 3. Pay ahead on your loan when possible 4. You may change your repayment plan annually 5. Contact your lender immediately if you are having any trouble making your loan payment 33

34 Student Loans of North Dakota (800) mystudentloanonline.nd.gov Laura Entzel 34

35 Obtaining a Personal or Home Loan The Five C s of Credit 1. Credit Character: How has borrower paid back loans in the past, credit report, credit score, delinquencies, credit balances, etc.? 2. Capacity: Is the income and job stability sufficient to repay the debt? Payment to income ratios are normally calculated. 3. Capital: What assets are available for down payment, closing costs and reserves? 4. Conditions: Are there any potential changes that may adversely affect the borrower such as business shutdowns, divorce, lawsuit, etc. 5. Collateral: What is the collateral for the loan (car, boat, home, unsecured) and how would it hold its value during the term of the loan? Normally an underwriter would review all of these categories before making a recommendation to approve or deny the loan request. It is important you keep in mind that YOUR credit history will play an important role throughout your life. Being able to buy a nicer car, having that perfect home for your family and even getting that job promotion can be affected by how you handle your credit obligations. Don t fall into the same trap as those who justify to themselves it is OK to default on a loan because the security (car, home, etc.) is no longer worth what is owed on the loan. You were the one who made the promise to fulfill an obligation and need to live up to it! 35

36 Questions? Gate City Bank Blaise P. Johnson Executive Vice President 36