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Introducing FICO 9: What This Means for You

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Yesterday, FICO announced that it will be releasing FICO Score 9.  If you have unpaid medical bills or other collection items, this change will impact you.

What is FICO?

FICO is the most widely used credit score in the country. 90 percent of all credit decisions (mortgages, cards, credit cards, personal loans and more) use the FICO score in some way.

So, when FICO makes a change to its score, we should listen. This score has a big impact, because lenders use it and others (like CreditKarma) are trying to approximate it.

What are they changing?

This change is huge for people with unpaid medical bills and other collection items.

Unpaid medical bills

According to Experian, 64.3 million Americans have a medical collection record on their bureau. In the current world, this can significantly harm their credit score.

If you have an unpaid medical bill, it can be reported to a credit bureau in two ways:

  • The medical service provider can report to the bureau, or
  • A third party debt collection agency that has purchased the debt, or has been contracted to collect the debt, can report it

99.4 percent of cases have been reported by collection agencies. So, if your doctor is calling you to pay – it probably hasn’t been reported to an agency. But, once a collection agency starts calling you, you probably have a negative item on your credit bureau.

The purpose of a credit score is to help lenders understand the likelihood of someone being responsible and paying back on time. There has been a widespread belief that people have been unfairly punished for medical bills. In fact, the CFPB has proven that people have been unfairly punished, in a May 2014 report.

With the new score, FICO is agreeing with the CFPB. Medical collections will now be differentiated from non-medical collections. And people will be “punished less” for medical collections. This makes sense, for three reasons:

  1. The medical system is complex, and many people have been hit with small medical collections that they didn’t even realize they owed. For example, with a small co-pay that ended up with a collection agency.
  2. Historically, many responsible people could not get insurance because they had a pre-existing condition. And, when medical disaster struck, they had no way to pay the medical bills. They tried to be responsible, but couldn’t.
  3. Even with insurance, multiple emergencies in a family can lead to large deductible payments. Doctors and hospitals can quickly turn over bills to collection agencies, resulting in a negative remark on the credit bureau. Even people who are just paying back their medical bills, responsibly, over time can be punished.

This is a big win for the CFPB. Hats off. A government agency has done the math for the industry, and the industry has agreed. This should result in better access to credit, and lower rates on existing credit – once (and if) the changes are accepted by the industry.

Paid Collection Accounts will now be bypassed

Beyond medical bills, many other types of debt can end up on your credit bureau. For example, failure to pay your utility bill, your phone bill, your overdraft or any other type of debt can result in your account being sold to a collection agency. And the agency will usually report the collection account on your bureau. Having these accounts can seriously harm your score.

But, the older the collection item, the less impact it has on your score. I have regularly met people who felt confused. They have recovered and now had money. Should they pay back that five-year-old collection item, or just let it age. They wanted to pay it back, but would receive advice from some people not to do so. Why? Because activity on a collection item could make it appear more recent.

This change removes all ambiguity. If you pay back your collection items, your score will benefit. This is the way it should be.

When will I see the impact

Unfortunately it will take a while. FICO sells its credit score to banks. Whenever a new score is introduced, a bank has to decide whether or not to upgrade. In order to make this decision, they need to do a lot of analysis.

First, they will perform a “retro” analysis. This means they will look at the past few years of their portfolio history, and they will estimate how the portfolio would have performed if the new score was used.

They will then need to build strategies, which includes the cutoff (above what score will they approve accounts), the pricing and the extra rules that they want to build. In my experience, this takes 12 to 18 months (there are so many committees that need to approve this!).

Banks are very eager to “swap in” new customers. So, if previously rejected customers can now be approved, banks will be keen to proceed.

They are less keen to charge people lower interest rates. So, the CFPB needs to watch the banks closely. If people are truly lower risk, they should pay lower prices. But, banks are not eager to reduce pricing.

In Conclusion 

We fully support the changes. Medical bills are being severely punished. And people should not be afraid to pay off collection accounts.

We are realistic: it will be a while before we feel the impact.

And we are rightly skeptical: banks will be happy to approve more people and give more credit. They will be less excited to reduce interest rates.

Got questions? Get in touch via TwitterFacebook, email info@magnifymoney.com or let us know in the comment section below!

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How to Use a Balance Transfer Check to Deposit Funds into Your Bank Account

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If you’re struggling to pay debt on a high-interest credit card, you’ve probably considered a balance transfer. If you haven’t, you may want to.

A balance transfer is when you take a balance from Credit Card A with a high interest rate and transfer it to Credit Card B, which is offering a low or 0% APR promotional period.

There are a few catches to consider before jumping head first into a balance transfer. Some balance transfers have a fee of 3% to 5% per transfer, however, these fees are often much less than you’d pay in interest at existing rates. You’re also required to transfer a balance within a certain timeframe typically within 60 days for it to qualify for the deal. And you need to pay off the transferred balance before the intro period ends. Otherwise, your interest rate will hike to the standard post promotional rate, often 15% APR or higher, or in some cases you may even be on the hook to pay with retroactive interest.

However, if you follow the rules, a balance transfer can help you pay off your debt much faster – even debt that isn’t just on another credit card.

How to Transfer Your Debt onto a Balance Transfer Card

Transferring a balance from one credit card to another is pretty easy. You just hunt for a balance transfer card with favorable terms.

Once you apply and get approved, there’s usually a section in the online account management dashboard where you input the card number of the account from which you want to roll over the balance. Or you can call into a representative to initiate the transfer for you. Within a week or two, the balance will appear on your new account and be paid off from the old account.

Using a balance transfer check is another way to get your debt from one account to another. This option is particularly useful if you need to transfer a debt that’s not on another credit card.

What is a Balance Transfer Check?

A balance transfer check is like a typical check except it’s issued by your credit card company and used to withdraw cash from your credit line. You can write out a check directly to the company that has the debt you want to pay off. Or you can write a balance transfer check payable to yourself for a cash deposit.

Here’s an example. Say you open up a balance transfer card with a $15,000 credit line and you want to pay off the last $5,000 of your student loan. You make out a balance transfer check of $5,000 payable to yourself. Once you get the cash in your bank account, you pay off the student loan with your balance transfer. Then you enjoy an interest-free period on the $5,000 balance that’s now sitting on the balance transfer card.

The Good and Bad of the Balance Transfer Check

Besides using the balance transfer check to pay off debt, you may able to use it to obtain cold-hard cash. In this scenario, you would keep some of the cash or all of it instead of using it to repay a debt. This isn’t a good idea if you’re deep in debt. It’s not free money and you’ll eventually owe interest on it.

There are a few other things to keep in mind when using a balance transfer check. First, not all credit card companies offer balance transfer checks as a way to transfer money. If your sole reason for signing up for a balance transfer card is using a balance transfer check, you need to read through the terms or reach out to the credit card company to make sure it’s an option. Otherwise, you could end up with a balance transfer card promotion that serves no purpose.

Even if you do happen to find a credit card company that offers balance transfer checks, verify that the process of obtaining a balance transfer check will happen quickly. As mentioned above, balance transfer deals usually have a deadline. If you transfer a debt after the deadline, it won’t qualify for the promotion.

You also need to be sure you pay off the balance before the end of the promotional period, especially on debts like student loans. If you use a balance transfer to pay off a student loan debt at 8%, then dropping to 0% sounds great. But if you have a lingering balance of say $1,000 after the promotional period is up, your debt has gone from a high of 8% to probably 18%! Be sure you have an actionable and realistic plan to pay off the debt before using your balance transfer.

Beware of the Cash Advance Convenience Check

You’ve probably come across a convenience check offering a cash advance in the mail before. Sometimes credit card companies will send them out with your monthly statements. Or Credit card companies trying to get your business will send them via snail mail to persuade you into taking on more debt.

Where a balance transfer check allows you to transfer funds with a low-interest or no-interest promotion, withdrawing cash through a convenience check cash advance can be costly. Standard cash advance rates and fees may apply regardless of your balance transfer deal.

For a quick example, Credit Card A offers an intro special of 0% APR that doesn’t apply to cash advances. Going through with a cash advance could cost as much as 25.24% interest right away regardless of a promotional deal.

Be careful and read the fine print that comes along with all checks that come from a credit card company. Whatever check you use to initiate a balance transfer shouldn’t cost you an arm and a leg.

Final Word

We can’t stress enough the importance of making sure a credit card company offers balance transfer checks if that’s the method you want to use. For the most part, transferring a debt from one credit card to another online is the most convenient way to take advantage of a balance transfer special which is something to consider.

If you plan to use a credit card check to increase your bank account balance, it may cost you. Do your homework before hastily writing out a check from your credit card company.

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What is a 401(k) Loan and How Does it Work?

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If you’re in need of money and your savings account balance is low, you may be tempted to use the handy little loan provision that most 401(k) plans offer. That’s right! You can probably borrow money from your 401(k). Right from your own account! It’s a nifty feature, but is it a good idea?

Today we’re going to start examining that question by diving into what exactly a 401(k) loan is and how it works. The next post in this series will look at a few situations in which borrowing from your 401(k) can work in your favor.

Let’s get into it!

Quick note: Every 401(k) plan has different terms and conditions and some plans don’t allow for loans at all. Consult your Summary Plan Description for specific details about how your plan handles loans.

What Is a 401(k) Loan?

When you borrow from your 401(k) you are actually borrowing money directly from yourself.

The loan is taken directly out of your 401(k) account balance. Then a repayment plan is created based on the amount you borrowed and the interest rate and those payments are made back into your 401(k) account, typically through an automatic payroll deduction.

In other words, you are borrowing from yourself and paying yourself back. Both the principal and the interest on the loan eventually make their way back into your 401(k).

How Much Can You Borrow?

Figuring out how much you can borrow from your 401(k) can be a little tricky, but here’s a quick summary.

If you haven’t had any outstanding 401(k) loan balance within the past 12 months, you are allowed to borrow the lesser of:

  • $50,000, or
  • 50% of your vested 401(k) balance. If that amount is less than $10,000 then you can borrow up to $10,000, but never more than your total account balance.

Sounds simple, right? But wait, there’s more…

If you have had an outstanding 401(k) balance within the past 12 months, the amount you’re allowed to borrow is reduced by the largest balance you had over that period.

Let’s look at a few examples:

  • Example #1: Joe has $25,000 in his 401(k) and has not had a 401(k) loan balance within the past 12 months. He is allowed to borrow up to $12,500.
  • Example #2: Theresa has $15,000 in her 401(k) and has not had a 401(k) loan balance within the past 12 months. She is allowed to borrow up to $10,000.
  • Example #3: Becca has $150,000 in her 401(k) and has not had a 401(k) loan balance within the past 12 months. She is allowed to borrow up to $50,000.
  • Example #4: Steve has $25,000 in his 401(k) and did have a 401(k) loan balance of $5,000 within the past 12 months. He is allowed to borrow up to $7,500.

What Is the Interest Rate?

Each 401(k) plan is allowed to set their own loan interest rate. You should consult your Summary Plan Description or ask your HR rep for details about your specific plan.

However, the most common interest rate is the prime rate plus 1%.

What Can the Money Be Used For?

In many cases there are no restrictions on how you use the money. It can be put to work however you want.

But some plans will only lend money for certain needs, such as education expenses, medical expenses, or a first-time home purchase.

How Long Do You Have to Pay the Loan Back?

Typically, your 401(k) loan must be paid back within 5 years. If the loan is used to help buy a house, the term may be extended up to 10-15 years.

The catch is that if your employment ends for any reason, the entire remaining loan balance is typically due within 60 days. If you aren’t able to pay it back within that time period, the loan defaults.

What Happens If You Default on the Loan?

A 401(k) loan defaults any time you aren’t able to comply with the terms of the loan. That could be failing to make your regular payments or failing to repay the remaining loan balance within 60 days of leaving the company.

When that happens, the remaining loan balance is counted as a distribution from your 401(k). That has two big consequences:

  1. Unless you’re already age 59.5 or meet other special criteria, that money will be taxed and hit with a 10% penalty.
  2. The defaulted amount is not eligible to be rolled over into an IRA or other employer retirement plan. So there’s no way to avoid the taxes and penalty.

The good news is that the default is not reported to the credit bureaus and therefore has no impact on your credit score. Though if you’re applying for a mortgage or other loan, the lenders may ask about any 401(k) loan defaults and factor that into their decision.

How Do You Apply for a 401(k) Loan?

And as long as you have a vested 401(k) balance, the process loan application process is typically pretty simple.

Other than adhering to any specific restrictions your plan may enforce (see above), it’s usually as easy as requesting the loan. That can often be done online or at worst with a little paperwork through your human resources department.

There is no credit check for 401(k) loans, which can make them easier to get than other types of loans. And loans must be available to all employees, so you should be able to get approved no matter what your position is in the company.

Other Considerations

Here are a few other things to consider as you weigh the pros and cons of taking out a 401(k) loan:

  • Other than the possibility of default, the biggest potential cost is the missed investment returns while the money is out of your 401(k). Depending on the size of the loan and the market returns during the life of the loan, that could be significant.
  • Your spouse often has to sign off on the loan.
  • You can have more than one 401(k) loan out at a time, but the total loan balance can’t exceed the limits described above.
  • There may be a fee involved with taking out the loan.
  • Your loan payments do not count as 401(k) contributions, and your employer may or may not allow you to keep contributing to your 401(k) while your loan is outstanding.
  • Because the loan is not reported to credit agencies, a 401(k) loan is not a way to build your credit history or increase your credit score.
  • You typically cannot take a loan from a 401(k) you still have with an old employer.

Is a 401(k) Loan a Good Idea?

Those are the nuts and bolts of 401(k) loans, so is taking out a 401(k) loan a good idea? The answer is a definite maybe. There are times where it can be the best option, times where it’s a bad idea, and times where it can actually increase your overall investment return. Regardless, you should be sure to do a deep analysis and determine if you will definitely be able to pay the loan back in a timely manner before utilizing the 401(k) loan.

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19 Options to Refinance Student Loans – Get Your Lowest Rate

19 Options to Refinance Student Loans - Get Your Lowest Rate

Updated: May 24, 2016

Are you tired of paying a high interest rate on your student loan debt? Are you looking for ways to refinance your student loans at a lower interest rate, but don’t know where to turn? We have created the most complete list of lenders currently willing to refinance student loan debt.

You should always shop around for the best rate. Don’t worry about the impact on your credit score of applying to multiple lenders: so long as you complete all of your applications within 14 days, it will only count as one inquiry on your credit score. You can see the full list of 19+ lenders below, but we recommend you start here, and check rates from the top 5 national lenders offering the lowest interest rates. We update this list daily:

LenderTransparency ScoreMax TermFixed APRVariable APRMax Loan Amount 
earnestA+

20


Years

3.50% - 7.05%


Fixed Rate

2.13% - 5.35%


Variable Rate

No Max


Undergrad/Grad
Max Loan
apply-now
SoFiA+

20


Years

3.50% - 7.74%


Fixed Rate

2.14% - 5.94%


Variable Rate

No Max


Undergrad/Grad
Max Loan
apply-now
lendkeyA+

20


Years

3.25% - 8.22%


Fixed Rate

2.14% - 6.92%


Variable Rate

$125k / $175k


Undergrad/Grad
Max Loan
apply-now
commonbondA+

20


Years

3.50% - 7.74%


Fixed Rate

2.15% - 5.95%


Variable Rate

No Max


Undergrad/Grad
Max Loan
apply-now
PurefyA+

20


Years

3.95% - 6.75%


Fixed Rate

3% - 4.95%


Variable Rate

$350k / $350k


Undergrad/Grad
Max Loan
apply-now

We have also created:

But before you refinance, read on to see if you are ready to refinance your student loans.

Can I Get Approved?

Loan approval rules vary by lender. However, all of the lenders will want:

  • Proof that you can afford your payments. That means you have a job with income that is sufficient to cover your student loans and all of your other expenses.
  • Proof that you are a responsible borrower, with a demonstrated record of on-time payments. For some lenders, that means that they use the traditional FICO, requiring a good score. For other lenders, they may just have some basic rules, like no missed payments, or a certain number of on-time payments required to prove that you are responsible.

If you are in financial difficulty and can’t afford your monthly payments, a refinance is not the solution. Instead, you should look at options to avoid a default on student loan debt.

This is particularly important if you have Federal loans.

Don’t refinance Federal loans unless you are very comfortable with your ability to repay. Think hard about the chances you won’t be able to make payments for a few months. Once you refinance, you may lose flexible Federal payment options that can help you if you genuinely can’t afford the payments you have today. Check the Federal loan repayment estimator to make sure you see all the Federal options you have right now.

If you can afford your monthly payment, but you have been a sloppy payer, then you will likely need to demonstrate responsibility before applying for a refinance.

But, if you can afford your current monthly payment and have been responsible with those payments, then a refinance could be possible and help you pay the debt off sooner.

Is it worth it? 

Like any form of debt, your goal with a student loan should be to pay as low an interest rate as possible. Other than a mortgage, you will likely never have a debt as large as your student loan.

If you are able to reduce the interest rate by re-financing, then you should consider the transaction. However, make sure you include the following in any decision:

Is there an origination fee?

Many lenders have no fee, which is great news. If there is an origination fee, you need to make sure that it is worth paying. If you plan on paying off your loan very quickly, then you may not want to pay a fee. But, if you are going to be paying your loan for a long time, a fee may be worth paying.

Is the interest rate fixed or variable?

Variable interest rates will almost always be lower than fixed interest rates. But there is a reason: you end up taking all of the interest rate risk. We are currently at all-time low interest rates. So, we know that interest rates will go up, we just don’t know when.

This is a judgment call. Just remember, when rates go up, so do your payments. And, in a higher rate environment, you will not be able to refinance to a better option (because all rates will be going up).

We typically recommend fixing the rate as much as possible, unless you know that you can pay off your debt during a short time period. If you think it will take you 20 years to pay off your loan, you don’t want to bet on the next 20 years of interest rates. But, if you think you will pay it off in five years, you may want to take the bet. Some providers with variable rates will cap them, which can help temper some of the risk.

Places to Consider a Refinance

If you go to other sites they may claim to compare several student loan offers in one step. Just beware that they might only show you deals that pay them a referral fee, so you could miss out on lenders ready to give you better terms. Below is what we believe is the most comprehensive list of current student loan refinancing lenders.

You should take the time to shop around. FICO says there is little to no impact on your credit score for rate shopping as many providers as you’d like in a single shopping period (which can be between 14-30 days, depending upon the version of FICO). So set aside a day and apply to as many as you feel comfortable with to get a sense of who is ready to give you the best terms.

Here are more details on the 5 lenders offering the lowest interest rates:

1. Earnest*: Variable Rates from 2.13% and Fixed Rates from 3.50% (with AutoPay)

earnest1Earnest (read our full Earnest review) offers fixed interest rates starting at 3.50% and variable rates starting at 2.13%. Unlike any of the other lenders, you can switch between fixed and variable rates throughout the life of your loan. You can do that one time every six months until the loan is paid off. That means you can take advantage of the low variable interest rates now, and then lock in a higher fixed rate later. You can choose your own monthly payment, based upon what you can afford (to the penny). Earnest also offers bi-weekly payments and “skip a payment” if you run into difficulty.

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2. SoFi*: Variable Rates from 2.14% and Fixed Rates from 3.50% (with AutoPay)

sofi-inline

SoFi (read our full SoFi review) was one of the first lenders to start offering student loan refinancing products. Although SoFi initially targeted a very select group of universities (it started with Stanford), now almost anyone can apply. You need to have a degree, a good job and good income in order to qualify. SoFi wants to be more than just a lender. If you lose your job, SoFi will help you find a new one. If you need a mortgage for a first home, they are there to help. And, surprisingly, they also want to get you a date. SoFi is famous for hosting parties for customers across the country, and creating a dating app to match borrowers with each other.

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3. LendKey*: Variable Rates from 2.14% and Fixed Rates from 3.25% (with AutoPay)

Lendkey1LendKey (read our full LendKey review) works with community banks and credit unions across the country. Although you apply with LendKey, your loan will be with a community bank. If you like the idea of working with a credit union or community bank, LendKey could be a great option. Over the past year, LendKey has become increasingly competitive on pricing, and frequently has a better rate than some of the more famous marketplace lenders. And, during May 2016, anyone who applies via MagnifyMoney will receive a $250 cash bonus, which will be awarded when the loan closes.

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4. CommonBond*: Variable Rates from 2.14% and Fixed Rates from 3.25% (with AutoPay)

Commonbond1CommonBond (read our full CommonBond review) started out lending exclusively to graduate students. They initially targeted doctors with more than $100,000 of debt. Over time, CommonBond has expanded and now offers student loan refinancing options to graduates of almost any university (graduate and undergraduate). In addition (and we think this is pretty cool), CommonBond will fund the education of someone in need in an emerging market for every loan that closes. So not only will you save money, but someone in need will get access to an education.

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5. purefy: Variable Rates from 3% and Fixed Rates from 3.95% 

purefy

Purefy (read our full purefy review) was formerly known as CordiaGrad. The founder of purefy used to work for a big bank, and decided to buy a small bank and use it as a platform to grow. Purefy will refinance undergraduate and graduate loans.

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In addition to the Top 5 (ranked by interest rate), there are many more lenders offering to refinance student loans. Below is a listing of all providers we have found so far. This list includes credit unions that may have limited membership. We will continue to update this list as we find more lenders. This list is ordered alphabetically:

  • Alliant Credit Union: In order to qualify, you need to have a bachelor’s degree. The minimum credit score is 680, and you need two years of employment and a minimum income of $40,000. Interest rates start as low as 3.75%. Anyone can join this credit union by making a $10 donation to Foster Care for Success.
  • Citizens Bank: To get the best deal, you should have at least a bachelor’s degree. They will look at your credit history, and want to make sure that at least the last three payments on your student loans have been made on time. If you don’t have your degree, you need to have made the last 12 payments (principal and interest) on time. You must make at least $24,000 per year. They offer fixed rates starting at 4.74% and variable rates start from 2.18%.
  • College Avenue: College Avenue offers fixed rates starting at 4.74% and variable at 2.50%, and only offers 15 year terms.
  • CommonWealth One Federal Credit Union: Variable interest rates start at 3.36%. You can borrow up to $75,000 and need to be a member of the credit union in order to qualify.
  • Credit Union Student Choice: This is a tool offered by credit unions. The criteria and pricing vary by credit union. The credit unions have restricted membership, but you can find out if you qualify on this site.
  • DRB Student Loan*: They will refinance undergraduate, Parent PLUS and graduate loans including MBA, Law, Medical/Dental (Post Residency), Physician Assistant, Advanced Degree Nursing, Anesthetist, Pharmacist, Engineering, Computer Science and more degrees. Variable rates as low as 4.17% and 5.77% fixed.
  • Eastman Credit Union: They don’t share much of their criteria publicly. Fixed rates start at 6.5% and you must be a member of the credit union. Credit union membership is not available to everyone.
  • Education Success Loans: You must be out of school for at least 30 months, and you must have a degree. You also need a good credit score, with on-time payment behavior. Variable and fixed loan options are available, with rates starting at 4.99%.
  • EdVest: They offer refinancing options for private loans used to finance attendance at a Title IV, degree-granting institution. If the loan balance is below $100,000 you need to make at least $30,000 a year. If your balance is above $100,000 you need to make at least $50,000. Variable rates start at 3.180%, and fixed rates start at 4.740%.
  • First Republic Eagle Gold. It’s hard to beat these rates – starting at 1.95% fixed and 1.87% variable. But you need to go in person to a First Republic branch to complete your account opening. They are located in San Francisco, Palo Alto, Los Angeles, Santa Barbara, Newport Beach, San Diego, Portland (Oregon), Boston, Palm Beach (Florida), Greenwich, and New York City. Loans must be $60,000 – $300,000 and you need a 750 or higher credit score with 24 months experience in your current industry.
  • IHelp: This service will find a community bank. Community banks can actually be expensive. You need to have 2 years of good credit history, with a DTI (debt-to-income) of less than 45% and annual income of at least $24,000. Fixed rates are available, starting at 6.22% with a co-signer, and 7.21% for non-cosigned loans.
  • Mayo Employees Credit Union: You need at least $2,000 of monthly income and a good credit history. Variable rates are available, starting at 5.00% and you would need to join the credit union.
  • Navy Federal Credit Union: This credit union offers limited membership. For men and women who serve, the credit union can offer excellent rates and specialized underwriting. Variable interest rates start at 3.87%.
  • RISLA: You need at least a 680 credit score, and can find fixed interest rates starting at 4.49% if you use a co-signer.
  • UW Credit Union: $25,000 minimum income required, with at least 5 years of credit history and a good repayment record. Fixed and variable interest rates are available, with variable rates starting at 2.21% and fixed rates starting at 4.04%. You need to join the credit union in order to refinance your loans.
  • Wells Fargo: As a traditional lender, Wells Fargo will look at credit score and debt burden. They offer both fixed and variable loans, with variable rates starting at 3.49% and fixed rates starting at 5.99%. Wells Fargo does not have a tradition of being a low cost lender.

You can also compare all of these loan options in one chart with our comparison tool. It lists the rates, loan amounts, and kinds of loans each lender is willing to refinance. You can also email us with any questions at info@magnifymoney.com.

Don’t forget to follow us on Twitter @Magnify_Money and on Facebook.

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*We’ll receive a referral fee if you click on offers with this symbol. This does not impact our rankings or recommendations. You can learn more about how our site is financed here.

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Obama Administration Reaches out to Americans with Disabilities and Student Loans

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The Obama administration recently announced a new plan to ensure that permanently disabled Americans with outstanding federal student loans are able to easily apply for student loan discharge.

The process of applying for loan discharge due to permanent disability has been available in its current form since 2012, but only a small percentage of eligible individuals have actually applied. The new initiative set forth by the Department of Education will actively identify and reach out to individuals who are eligible for Total and Permanent Disability (TPD) loan discharge, to let them know about this option and help guide them through the necessary steps. Letters containing this information will be sent out over the next several months to eligible individuals, and follow-up letters will be sent after 120 days if no response is received.

However, if you do not receive a letter from the Department of Education but believe you may be eligible for TPD loan discharge, you can apply on your own by using the online form found here. If you’d prefer, you can also request that a paper version of the application be sent to you by calling (888) 303-7818 (seven days a week between 8am and 8pm Eastern Time), or emailing DisabilityInformation@Nelnet.net.

You must include supporting documentation along with your application. This documentation must consist of one of the following:

  • If you are currently receiving either Social Security Disability Insurance or Supplemental Security Income benefits, you can submit documentation of the award for these benefits.
  • If you are a veteran and your disability is a result of your service in the U.S. military, you can submit documentation from the Department of Veterans Affairs stating that your disability prevents you from being gainfully employed.
  • If you have neither of the above types of documentation, you can obtain documentation from a certified physician stating that you have a permanent disability that prevents you from being gainfully employed.

The application and supporting documentation should be mailed to:

U.S. Department of Education
P.O. Box 87130
Lincoln, NE 68501-7130

The Department of Education estimates that most applications will be processed within 30 days. While your application is under consideration, your obligation to repay your student loans will be suspended.

The Obama administration is aiming to reach as many eligible Americans as possible, so if you know someone who might qualify for TPD loan discharge, please forward this information to them. More information about the TPD loan discharge application process is available here.

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Pay Down My Debt, Personal Loans

Personal Loans for People with Bad Credit

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Updated May 19, 2016

When your credit is less than satisfactory, it can be difficult to find a lender willing to give you a personal loan. That doesn’t mean it’s impossible to find one – there are more options available now than ever before to get a personal loan with bad credit. What’s better is you can easily apply online to see the rates for which you qualify.

That’s thanks to lenders such as Springleaf, Avant, and LendingClub. They each have lower credit thresholds and none rely solely on your FICO score when deciding to lend to you, making it easier to qualify.

Even though you might have a poor credit score, your actual credit history may not be that bad. Your credit file could be thin because you didn’t start building any credit until recently, or maybe you’ve only ever had one open line of credit. Whatever the reason, just because your score is low doesn’t mean you’re not creditworthy, and these lenders know that.

Therefore, it’s worth making sure you’re still getting a decent deal on personal loan terms. It can be easy to think that because your score is low, you’ll be approved for a less than ideal interest rate, but you shouldn’t accept the first offer that comes your way.

Let’s take a look at what these three lenders offer so you know what terms are available to you.

Avant Personal Loan

You can borrow anywhere from $1,000 to $35,000 with a personal loan from Avant*. Specific rates and terms vary depending on your state of residence, but in general, terms offered are 2 to 5 years, and APRs range from 9.95% to 39.95%.

An example loan repayment: if you borrow $3,000 with an APR of 36.00% on a 3 year term, you’ll have a monthly payment of $137.41.

Applying with Avant doesn’t affect your credit score – it’s initially just a soft pull. On its FAQ, it states most customers have a FICO score ranging from 600 to 700, though you can still qualify with a score of 580.

Its customer service team is on staff seven days of the week to assist you in case you have any questions. It’s also possible to receive your funds as soon as the next business day.

Avant’s personal loans are currently offered in all states except West Virginia, North Dakota, Iowa, and Maine.

There is no prepayment penalty or origination fee. However, if you’re 10 days past due on a payment, you’ll be charged a $25 late fee. Avant does mention it offers late fee forgiveness, though.

If your payment is returned unpaid, you’ll be responsible for a $15 fee each time your payment fails to go through.

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LendingClub Personal Loan

LendingClub* is different than Springleaf and Avant because it’s a peer-to-peer lender. Individual investors can choose to put their money toward your loan – the money isn’t coming from a bank.

You can borrow anywhere from $1,000 to $40,000 with LendingClub. You can borrow for up to 5 years. Its APR ranges from 5.99% to 35.89%.

For example, if you borrow $20,000 on a 5 year term at an APR of 8.91%, your monthly payment will be around $185.24. That’s including an origination fee of 3% (or $600), so the total amount you receive would be $19,400.

There’s no prepayment penalty, but you need to watch out for the origination fees. These range from 1% to 6%, depending on your loan grade. Remember to factor this in when receiving offers, because being charged an origination fee lessens the amount of money you actually receive.

To be eligible for a loan with LendingClub, you must be 18 years or older and have a verifiable bank account. You must be a U.S. citizen, permanent resident, or have a valid long term visa. Your credit score should be at least 600 to qualify.

LendingClub does not offer loans in Iowa and West Virginia.

When determining creditworthiness, it takes the following into consideration:

  • Debt-to-income ratio
  • Credit score
  • Length of credit history
  • Number of open accounts
  • Usage and payment history
  • Other credit inquiries over the past 6 months

It has an A+ rating with the BBB and has been accredited since 2007.

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Springleaf Personal Loan

Springleaf offers personal loans ranging from $1,500 to $10,000. You can apply for a secured or unsecured loan. You can also apply online and have a decision within a day.

Springleaf has been around for over 90 years, has an A+ rating with the BBB. It is a brick-and-mortar bank with over 800 branches across 27 states. Unfortunately, that means it’s limited to those with branches nearby, as you need to physically sign for the loan.

Its website has minimal information on APRs, terms, and fees for loans, but from the calculator provided, we know the APR range is 15.99% to 39.99%, and 2 to 5 year terms are offered.

Springleaf also has a track record for working with borrowers who have low credit. You need a minimum credit score of 550 to qualify.

What would an example loan look like? If you borrow $4,000 on a 3 year term, at an interest rate of 30%, your monthly payment will be around $169.81.

You can check to see if Springleaf has a pre-qualified offer for you, as it doesn’t affect your credit score. If you do accept its offer, then a hard credit inquiry occurs.

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Which Lender is the Best Choice?

It’s largely going to depend on the rates you receive. Luckily, with Avant and LendingClub, you’re able to apply without a hard inquiry on your credit, which allows you to shop around without worry. It’s smart to start with these two lenders and see which of the two offers you better terms.

Here’s a side-by-side comparison of the rates and terms offered by all 3 lenders:

Criteria Springleaf Avant LendingClub
Amount Borrowed Up to $10,000 Up to $35,000 Up to $40,000
APR Range 15.99% – 39.99% 9.95%-39.95% 5.99% -35.89%
Length of Loan Up to 5 years Up to 5 years Up to 5 years
Min. Credit Score 550 550 600

Your best option is to shop around. You can apply to LendingClub, Prosper and Avant without hurting your score. We recommend you start there first.

If you need the money today and live near a Springleaf branch, that is your best option. But if you can wait a day, Avant is able to get the funds to you in one business day.

 

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7 Personal Loans for 600 to 700 Credit Scores

7 Personal Loans for 600 to 700 Credit Scores

Updated May 19, 2016

If you have a less-than-perfect credit and want to pay off credit card debt, fund home improvement projects, or pay for unexpected expenses, then finding a lender that will consider your credit might seem like an uphill battle.

Refinancing high-interest debt with a personal loan can quickly cut down the amount of interest you’re paying, which effectively allows you to pay if off in less time. You particularly want to avoid payday and title loan lenders at all costs.

Many personal loan companies approve people with scores as low as 600. The best way to shop for the best deal is to use the MagnifyMoney Personal Loan Shopping Tool. With this tool, you can get prequalified for personal loans without hurting your credit score. With just one application (which takes less than five minutes), multiple providers will compete for your business and offer you real rates. You can start shopping here.

If you don’t want to use the tool, you can go to each personal loan company individually. Here are 7 personal loans for people with credit scores of 600 to 700. Read below to see if one is right for you!

LendingClub

LendingClub offers loans of up to $40,000, for individuals with a minimum credit score of 600. Its APR ranges from 5.99% to 35.89%. LendingClub also uses a soft credit pull to determine your rate, which will not affect your credit.

The Fine Print

In order to qualify for a LendingClub personal loan you must:

  • Not have more than 5 hard credit inquiries in the last 5 months
  • Have at least two active credit accounts open
  • Have a credit history of at least 36 months
  • Debt-to-income ratio of less than 40%
  • Be able to verify employment and income

Once you have met the minimum criteria, LendingClub uses its own scoring system to determine what amount you can borrow as well as your rate.

You can borrow money for up to 60 months, but it does charge up-front (origination) fees depending on credit worthiness, which come out of the loan amount.

Pros

  • Can see your rate with a soft credit pull
  • Will consider applicants with credit scores as low as 600
  • Offers very competitive interest rates for people with scores below 700
  • The application process only take a few minutes

Cons

  • Missed payments or items in collections will result in your application being rejected
  • Loan processing could take a week or more
  • APR can be as high as 35.96%
  • It does charge origination fees
  • Is not available in Iowa or West Virginia

LendingClub will approve people with credit scores as low as 600. If approved, the interest rates offered can be very competitive and the online application process is easy. This is good first stop for anyone with a score of 600 or higher to find the best deal.

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Avant

Avant offers loans ranging from $1,000 to $20,000 when financed through Avant, and up to $35,000 when financed through WebBank. According to its FAQ, Avant will consider credit scores as low as 550, but prefers to work with scores in the 600-700 range.

The Fine Print

Despite its seemingly ideal low credit score requirements and high maximum loan amount, Avant has some fine print for which to watch out.

Interest rates range from 9.95% to 36.00%. Avant does not charge an up-front origination fee.  Loans are not available in Massachusetts, Hawaii and Nevada.

However, an Avant loan application only requires a soft pull to see your rate, which does not affect your credit score, and there are no prepayment penalties.

The Avant personal loans scores an “A” Transparency Score.

Pros

  • Minimum credit score of 580, through it prefers to work with scores above 600
  • “A” Transparency Score
  • Can see your rate with a soft credit pull
  • Fixed terms, fixed interest rate, no prepayment penalties
  • No origination fee

Cons

  • Interest rates range from 9.95% to 36%
  • Not available inMassachusetts, Hawaii and Nevada

While Avant’s interest rates seem high, with its “A” Transparency score, this loan is a great option for individuals with credit scores as low as 550.

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OneMain

OneMain offers loans up to $10,000 for individuals with credit scores starting at 550. It offers terms of up to 60 months and APR ranges from 17.99% to 35.99%.

The Fine Print

In order to be accepted for a OneMain Loan, you must live near a OneMain branch, as a face-to-face meeting is required to finalize the loan. OneMain personal loans are not available in Alaska, Arkansas, Connecticut, Massachusetts, Nevada, Rhode Island, Vermont, or Washington D.C.

In order to qualify you must have:

  • Verifiable, steady income
  • No bankruptcy filings, ever
  • Be at least 18 years of age
  • Have at least some established credit history
  • Credit score of at least 550

If, at any time during the application process, OneMain becomes aware that you intend to use the personal loan for gambling, your loan application will be cancelled. OneMain personal loans cannot be used for business expenses or tuition.

You cannot see your OneMain rate until it performs a hard credit pull, which does affect your credit, and the OneMain personal loan earns a “B” Transparency score.

Pros

  • Credit score as low as 550
  • Fixed Rates
  • No Prepayment penalty
  • Fixed terms
  • Convenient location, at OneMain branches

Cons

  • APR ranges from 12% – 35.99%
  • Loans cannot be used for business expenses or tuition
  • Cannot see rate without a hard credit pull
  • Personal loans only available up to $10,000
  • Loans not available in Alaska, Arkansas, Connecticut, Massachusetts, Nevada, Rhode Island, Vermont, or Washington D.C.
  • You must visit a OneMain branch to complete the loan.

The OneMain personal loan caters to people with low credit scores, or who would prefer to complete the personal loan application process at a branch, rather than online.

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Springleaf

Springleaf offers personal loans ranging from $1,500 to $25,000. Borrowers can actually apply online and receive instant approval before visiting a branch. The online application does require a hard credit pull.

The Fine Print

Springleaf APRs range from 25.10% to 36.00%, which could actually be higher than the APR of a credit card.

Springleaf loans are only available in 27 states, but will consider borrowers with scores of less than 600.

Pros

  • No application fee
  • Will consider credit scores as low as 550
  • Many local branches, to receive funds

Cons

  • APR ranges from 25.10% – 36.00%
  • Hard credit pull required
  • “B” Transparency Score
  • Only available in 27 states

If you have damaged credit, a Springleaf loan may be perfect for you. Just be careful with the APR, as its minimum APR is quite high.

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Vouch

Vouch offers a unique lending experience, where your friends and family are able to “vouch” for your financial responsibility by putting a monetary stake on it and your rate decreases. Your friends and family must offer to pay back some of the loan in case you can’t, much like a co-signer. The Vouch personal loan basically lets you leverage your network and get a lower rate on a loan.

Vouch offers installment loans ranging from $500 to $7,500 and APR starting at 10.68%. However, even if you receive a loan at a 20% APR, your rate can actually decrease during the term as more friends and family vouch for you.

The Fine Print

In order to apply for a personal loan from Vouch, you must:

  • Be 18 or older
  • Be a legal U.S. resident
  • Have a credit score of at least 600
  • Must not be in foreclosure or bankruptcy
  • Have a verifiable bank account

Vouch does not charge any application, annual, or prepayment fees. It does charge 1% to 5% in origination fees. Late fees are 5% of your payment with a minimum of $15.

You can apply for a Vouch loan online with a soft credit pull, as long as you have a mobile phone to which Vouch can send a security code. Once the application has been filled out, it takes 24-48 hours to receive a loan offer.

Pros

  • Can see your rate with a soft credit pull
  • Minimum credit score of 600
  • No application, annual, or prepayment fees
  • Can apply online

Cons

  • APR up to 30%
  • Late fees are 5% of your payment, with a minimum of $15
  • Loans only up to $7,500

The Vouch personal loan is a great option if you have damaged credit and a network of friends and family that can support you in order to lower your rate.

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Freedomplus

Freedomplus offers loans ranging from $5,000 to $35,000 that can be used for everything from debt consolidation, to unexpected expenses. APR ranges from 8.47% to 29.90%.

Its biggest selling point is the same-day approval and availability of funds within 48 hours, a lifesaver in some circumstances.

The Fine Print

In order to qualify for a Freedomplus loan, you must:

  • Be 18 years or older
  • Be a legal US resident
  • Have a valid ID
  • Minimum credit score of 600
  • At least $25,000 in verifiable income
  • No bankruptcies in the last two years

Freedomplus charges origination fees ranging from 1.38% to 5.00%, which is deducted from the loan amount before you receive the funds. There are no prepayment penalties.

The Freedomplus personal loan scores a “B” Transparency score because its fee structure and much of the fine print is unclear or not covered by the final contract.

You can prequalify with a soft credit pull, which does not affect your credit score. However, Freedomplus requires a phone screening with each applicant before the loan is approved.

Pros

  • Will approve credit scores as low as 600
  • The phone screening may improve your chances of being approved for the loan
  • Same-day approval and funds within 48 hours
  • No prepayment penalty
  • Can prequalify with a soft credit pull

Cons

  • APR ranges from 8.47% to 29.90%
  • The fee structure is not readily available for review
  • Origination fee of 1.38% to 5.00% applies

The Freedomplus personal loan is a good option for you if you have less than perfect credit, and need access to funds quickly, without visiting a physical branch.

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Prosper

The Prosper personal loan process is a little different than a traditional lender. It is not a bank, but rather a peer-to-peer lender. Once you have applied, and checked loan terms and rates, you create a loan “listing” that then appears on in the Prosper marketplace.

From these listings, peers (investors) choose which loans they would like to finance. When your loan listing is financed, the money is transferred to your bank account.

Prosper offers loans from $2,000 to $35,000, and APR ranges from 5.99% to 36.00%. It offers loans terms of either 36 or 60 months. Your APR is determined during the application process, and is based on a credit rating score created by Prosper. Your score is then shown with your loan listing to give potential lenders an idea of your creditworthiness.

The Fine Print

Your loan listing will remain active for 14 days. After 14 days, your loan must be at least 70% funded to receive the funds. If you are not 70% funded within 14 days, you must reapply to have your loan re-listed.

Origination fees range from 1% to 5% and are based on your Prosper score. In order to qualify, you must:

  • Have a bank account
  • Have a social security number
  • No more than 7 inquiries on your credit in the last six months
  • A verifiable, steady income
  • A credit-to-debt ratio of less than 50%
  • At least three open accounts, such as checking, savings, and credit card.
  • No bankruptcies in the last year

A returned payment may result in a $15 fee, and late payments past 15 days are charged a 5% fee, with a minimum of $15.

Prosper’s overall fine print is very clear is its fees are quite minimal, so it scores it an “A” Transparency Score. Also, you can check your Prosper rate with a soft credit pull, which will not affect your credit score.

Pros

  • Minimum credit score of 640
  • Can see your rate with a soft pull
  • No prepayment penalties
  • Paying off a Prosper loan can reduce your APR on future Prosper loans

Cons

  • Only 14 days to secure financing from peer lenders
  • Origination fee of 1% to 5% applies
  • APR varies from 5.99% – 36.00%

Prosper is a flexible alternative with a low-end APR that beats a credit card.

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Shop Around to Find the Best Deal

If you have made past credit mistakes, or have very little credit, there are personal loans out there for you. Many of these lenders offer rates much lower than what you would be paying on a credit card, shaving month and hundred or thousands of dollars off of your debt.

Don’t give up on a personal loan just because of your credit – there are options out there for you. It never hurts to shop around and look for the best rates available, especially if the lender does a soft credit pull to show you your options.

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Pay Down My Debt, Personal Loans, Reviews

Best Egg Personal Loan Review

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Updated May 19, 2016

Best Egg is a personal loan company trying to make the borrowing process fast and simple for people looking to refinance credit cards or who need funds for personal use. In this review, we will examine the costs and loan application process for applying for a loan through Best Egg.

Overview

Best Egg offers unsecured personal loans. These are installment loans with a fixed monthly payment for the life of the loan, but like a credit card, are not secured with property such as a car or home. Meaning you don’t have to provide collateral in order to receive a loan.

Best Egg offers loans up to $50,000 with a 3 year or 5-year payback period. Your interest rate is determined by your credit history and can range from 4.99%-29.99% with an origination fee ranging from 0.99%-4.99%.

Best Egg loans are originated through Cross River Bank, which is located in New Jersey. You do not need to be a New Jersey resident to apply for a Best Egg loan.

Pros

The best features of Best Egg are the simple terms and competitive interest rates for borrowers with a strong, positive credit history. Beyond the interest charge and origination fee, there are virtually no fees with Best Egg.

The company charges $15 for a late payment and $15 for a returned payment, which is lower than the typical $25 fee. There are no application fees and the origination fee is deducted from your starting loan proceeds, so there is no out-of-pocket cost to get started. However, this does mean you need to factor in the origination fee when you request the amount you need for a loan.

There are no pre-payment fees, so if you are able to make extra payments or pay off your entire balance early, you will not be charged any additional fees.

Cons

Best Egg only offers payback periods of 3 years or 5 years. If you want a shorter loan payback period than 2 years or a longer payback period than 5 years, Best Egg will not meet your needs.

As a borrower, your interest rate is based on your credit score and is locked in at the time of origination. While some borrowers may qualify for a 5.99% interest rate and 1% origination fee, Best Egg does not disclose the requirements to qualify for its best rates.

Even at 1%, the origination fee is certainly a negative considering other personal loans like SoFi offer no origination fee and no pre-payment penalty.

The highest interest rates are nearly 30% with a 5% origination fee. These rates are comparable to the worst credit card interest rates and may not offer you any benefit compared to using a credit card, which has no origination fee.

At the worst interest rates, this is still much better than typical payday loans or auto title loans, but you may have lower cost options available including lenders like Avant.

What Do I Need to Qualify?

Best Egg loans are approved based on your credit history. If you qualify, you are assigned a letter grade which corresponds to an interest rate between 5.99% and 29.99%. Current rates are available here.

The application process requires giving your email, and Best Egg uses a “soft pull” on your credit report to determine whether you qualify and find out your interest rate. A soft pull does not impact your credit score.

When you apply, you will need your Social Security number and current contact information handy for the application process, which is typical for any loan application.

Who is this Best For?

If you have credit card debt with a high interest rate, refinancing with Best Egg could save you a lot of money on interest over the life your debt. If you can lower your interest rate and set a fixed payback period compared to the open ended time frame on a revolving credit account, you could easily save thousands of dollars.

The site suggests using loan proceeds to help pay for a move, vacation, home improvement, debt consolidation, home purchase, or vehicle purchase. This product may save you money compared to credit cards, but it is a best practice to avoid debt where possible, particularly for optional luxury purchases like a vacation.

What About the Fine Print?

One of the biggest benefits of using Best Egg compared to competitors is that loans with Best Egg do not come with a mountain of fine print. There is almost no fine print actually.

You do not pay unless you get a loan and the only fees you will encounter are the origination fee and from late payments and rejected payments from your bank account. That is really it. There is no catch.

Unless you’re in Massachusetts, then the fine print states that your minimum loan amount is $6,000.

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Alternatives

SoFi

One alternative for your personal loan needs is SoFi. SoFi charges no origination fee, no pre-payment penalty fees and offers larger loans up to $100,000. SoFi also offers longer loan terms with a 3, 5, and 7 year option.

The highest fixed interest rate at SoFi is 12.99%. However, SoFi is much more selective with lending criteria. You have to be a graduate of a university on a list of Title IV approved universities.

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LendingClub

LendingClub is a social peer-to-peer lending site where your loan is funded by a large group of investors who each contribute to your loan. A $3,000 loan could be funded by as many as 120 individual investors.

LendingClub loans assign a letter grade which corresponds to an interest rate, similar to Best Egg. Interest rates are similar, ranging from 5.99% to 35.89%. The largest loan available on LendingClub is $40,000.

If you are unhappy with your interest rate at Best Egg, it could be worth applying at LendingClub to see how your rate comes in. Depending on your history, your rate may be better or worse than Best Egg. Just be aware: LendingClub is not available in Iowa or West Virginia.

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Always Shop Around

It doesn’t hurt your score to see your offer with Best Egg, but there are other personal loan providers who also offer a soft pull. Don’t just take the first offer you receive. You should always be shopping around for the best possible rate, especially because lenders offering a soft pull don’t harm your credit score.

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Student Loan Repayment for Health Researchers

Student Loan Repayment

Did you know that if you’re a health professional with an advanced degree such as an MD, PhD, PsyD, or PharmD, the National Institutes of Health (NIH) may be willing to repay up to $70,000 of your student loan debt over a two-year period?

NIH, the U.S. government agency responsible for overseeing human health research, currently manages a group of eight Loan Repayment Programs (LRPs). These LRPs are used to repay lenders for the existing principal and interest on loans. The catch, si that your loans must have been obtained from a qualifying lender (more details below).

The LRPs are meant as incentives for professionals who demonstrate the commitment and expertise to pursue a career in biomedical or bio-behavioral research but still owe a substantial amount in student loan debt. NIH recognizes that the high cost of education may cause many highly qualified individuals to pursue more lucrative careers in industry or private practice rather than in research, and hopes that a reduction in student loan debt may turn the prospect of a research career into a more attractive option.

What happens when you receive an award

All awards last for two years. If you receive an award, you are contractually obligated to engage in an average of at least 20 hours of research per week, funded by a U.S. non-profit such as a university or hospital.

How much can you receive?

All awards last for two years and during that time NIH will repay 25% of your eligible education debt (up to $35,000) for each of those years. For example, if you have $40,000 of qualifying educational debt, the LRP will give you $10,000 per year (25% of your total debt), for a total of $20,000 over the two-year period. Awardees can also apply to have their awards renewed after the two years are up.

Types of LRPs

You must also choose which one of the eight LRPs you wish to apply for; this choice will depend on what type of research you are planning to pursue. You may either choose research within the NIH (Intramural) or outside the NIH (Extramural) Specific LRP areas of research include:

Are you eligible?

In order to be eligible to apply for an LRP, you must possess an advanced professional degree and have demonstrated the potential for a successful research career. Additionally, your student loan debt must exceed 20% of your base salary at the institution where you are employed at the time of the award.

Your loans must also be eligible for the repayment program.

Loans that are eligible

A majority of the loans you have likely taken out yourself from the government or a financial institution are eligible. Even loans taken out to cover cost of living while attending college may be eligible, if these loans are within a reasonable amount. According to the NIH website, the following loans are eligible:

  • Undergraduate, graduate, and health professional school tuition expenses;
  • Other reasonable educational expenses required by the school(s) attended, including fees, books, supplies, educational equipment and materials, and laboratory expenses; and
  • Reasonable living expenses, including the cost of room and board, transportation and commuting costs, and other living expenses as determined by the Secretary.

However, your loans will be ineligible if you’ve consolidated with another person such as a spouse or child. Loans will also be ineligible if you’ve merged with with non-educational loans.

Loans that aren’t eligible

  • Loans that are delinquent, in default or not on current repayment schedule.
  • Loans already paid in full, meaning you can’t get your money back retroactively for loans you’ve paid off.
  • Parent PLUS loans.
  • Loans consolidated with another individual such as spouse, child or those consolidated with a non-educational loan.
  • Loans not obtained for educational purposes, even if you used them for education, such as a home equity loan.
  • Loans not from the U.S. government, a U.S. academic institution, a U.S. commercial or chartered lending institution, such as loans from friends or family.
  • Loans without eligibility documentation that is submitted in PDF form or print outs. This documentation includes:
    • Account statements less than 30 days old. You can find a sample account statement here.
    • Promissory notes/Disclosure statements for non-consolidated loans and consolidated loans. You can find a sample note here.
    • Consolidated loans will also require a complete list of loans that were consolidated. You can find a sample note here.
    • National Student Loan Data System Aid Summary and Detail Loan information reports.
  • Loans that exceed the reasonable level for educational or living expenses. Reasonable level is determined by the standard school budget for the year in which the loan was made.
  • Loans or financial debts that you received as a result of failure to satisfy a service obligation including but not limited to: Armed Forces Health Professions Scholarship, Indian Health Service Scholarship Program and National Institutes of Health Undergraduate Scholarship Program (UGSP).
  • Loans you take out after accepting a LRP from NIH.

Learn more about loan eligibility here.

How loans get repaid when you have more than one

You probably have student loan debt from more than one source, so you may be wondering how these debts will get prioritized by the NIH? Unfortunately, you won’t be able to do what you want with the LRP money. Instead, the NIH will determine the order in which loans are repaid based on the following priorities. Unfortunately, this does mean you can’t make repayments based on interest rates or loan amount.

Priority One

Loans guaranteed by the U.S. Department of Health and Human Services, these include:

Health Education Assistance Loans (HEAL)
Health Professions Student Loans (HPSL)
Loans for Disadvantaged Students (LDS)
Nursing Student Loans (NSL)

Priority Two

Loans guaranteed by the U.S. Department of Education, these include:

Direct Loans
Stafford Loans
Consolidation Loans
Perkins Loans
Graduate PLUS Loans (on or after July 1, 2006)

Federal Family Education Loans (FFEL)
Stafford Loans
Consolidation Loans

Priority Three

Loans that have been made to you or guarnateed by your State, the District of Columbia, the Commonwealth of Puerto Rico or a territory or pession of the United States (for example, Guam).

Priority Four

Loans made to you by an academic institution

Priority Five

Private (Alternative) Educational Loans:

MEDLOANS
Private (non-guaranteed) Consolidation Loans

How to apply

You can register and start the application process by registering here on the NIH website. The application cycle is typically open from September 1 to November 15 of each year.

The application process is long, extensive and competitive. The NIH provides an outline of tips for how to write a strong application as well as a road map to follow to ensure you’re checking off all the steps.

What you’ll need

  • Letters of recommendation
  • A research plan
  • Mentor who provides a mentoring plan
  • Demonstrate your qualifications and commitment
  • Verify your research is within the scientific method of the NIH Institute or Center to which you are applying
  • Loan documentation
  • Estimate quarterly LRP repayment

Tax implications

Unfortunately, this isn’t like forgiveness programs and your LRP loan repayments will be counted as taxable income. This could, and likely will, have significant implications for your tax bill. You’ll receive a form 1099-G if you have an Extramural LRP and a W-2 if you have an Intramural LRP.

Fortunately, the LRPs do help offset this tax burden by making a tax payment to the IRS that’s equal to 39% of the annual LRP repayment. If you owe an additional amount, then it will be your responsibility to pay.

Who should apply?

So if you’re a young researcher who is interested in a career in biomedical or biobehavioral research but are concerned about whether such a career will allow you to pay off your student loan debt in a timely fashion, consider applying for an LRP. While these awards are considered to be competitive, NIH states that approximately 1500 individuals have received awards each year thus far. Additional information on eligibility and the application process can be found at the NIH Division of Loan Repayment website.

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College Students and Recent Grads, Pay Down My Debt

CFPB Payback Playbook Might Reduce Student Loan Stress

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The amount of student loan debt in the United States is crushing in size, second only to mortgages. More than 41 million Americans owe more than $1.2 trillion collectively, according to the Consumer Financial Protection Bureau.

And those millions of borrowers have a big complaint: Student loan servicers aren’t providing basic information necessary to help borrowers repay their loans. “Many federal and private loan borrowers report experiencing serious problems accessing affordable repayment options or other repayment alternatives to avoid default,” said a September report from the CFPB. In fact, the report found that one out of four borrowers struggled to repay loans or was already in default.

Enter the Payback Playbook—the CFPB’s new proposal to help address this problem. As proposed, the Payback Playbook would be information that a loan servicer would provide, and it would clearly outline a borrower’s alternative repayment options on a loan. The info might be found online when the borrower logs into her student loan account, or in her monthly bill.

You can see an example at consumerfinance.gov/payback-playbook, and the CFPB is soliciting feedback on the Playbook until June 12, 2016. You can provide your feedback here.

“We’re asking the industry and consumers to weigh in on where they think it would be most helpful, and what information they need most,” says Moira Vahey, a spokesperson for the CFPB.

For instance, when would borrowers find it best to see personalized information on repayment options—during repayment or during a grace period? And what specific information would they like to see? “We also have a different prototype if you’re about to default,” Vahey says. “Those are all things we’re taking into consideration.”

One Department of Treasury report last year found that 70% of people in default on their student loans were eligible for income-driven repayment. “Once you’re in default on a loan, it can ruin your credit and future credit opportunities,” Vahey says. The fact that so many of the people in default could have opted for a more affordable repayment option—and didn’t—was one of the things that led the CFPB to take a closer look at the issue.

“The Payback Playbook would help ensure that people have the information they need to make decisions on what repayment plans are best for them,” Vahey says.

Once the CFPB has gotten feedback from borrowers and industry professionals, they plan to work with the Department of Education to finalize the Payback Playbook, and the Department of Education has committed to incorporating this into their work.

Says Vahey: “The aim is to get this Payback Playbook onto the over 40 million student loan borrowers’ bills in the next year.”

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