Wednesday, November 7, 2007

Refinance Your Student Loans

If you’ve recently graduated from college, you’ve probably been bombarded with mailings and advertisements urging you to refinance (or consolidate) your student loans right away. But wait, what is loan consolidation? And why should you do it?

If you’ve just graduated from college, you’ve probably got a number of different student loans, all in different amounts from different lenders at different interest rates. Loan consolidators (which can be private banks, lenders or government agencies) pay off all your individual loans in exchange for a single loan in the same amount issued to you. So now instead of all those different loans, you’ve got one loan that you repay to the consolidator.

Refinancing your student loans reduces your monthly payments and locks in a fixed interest rate. In most cases, student loans have variable interest rates set a few points below prime. As interest rates go up, so will the interest rate on your loans. When you refinance your loans, you lock in an interest rate based on the current market conditions that will be set for the life of your loan. Therefore, it’s important to evaluate the market before making the decision to consolidate. Right now, interest rates are low, but they’re going up and most economists predict that they’ll continue to go up for awhile. So for many people, this is a good time to refinance.

Your credit history will also determine your eligibility for loan consolidation programs. Loan consolidators can be picky in who they accept for their programs, so the option to refinance is usually only available to individuals who have established good credit by paying their loans back on time. If you’ve missed payments or made payments consistently late, you may not be offered the best terms, if you’re accepted at all. If your application is denied the first time, call the consolidator and talk to a loan officer about the reason for your rejection. The officer may offer you advice on how to qualify for their program at a later date.

If you decide to refinance, be sure to consolidate federal loans and private loans separately from each other. When you consolidate your loans, you’re typically offered a rate that’s 1-2% lower than the average rate of your loans. Federal student loans often carry much lower interest rates than private loans, so consolidating them together can bring up the average interest rate of your loans and leave you with a higher fixed rate locked in. If you only have one private loan, it may not make a difference, but it’s important to assess your options before committing to refinance.

Is there anyone who shouldn’t consolidate? Let’s look at a scenario. Tracy has 2 loans for $5,000 each that are scheduled to be paid off within 5 years. She can afford to make her monthly payments but wants to see if she can save a little extra cash each month by consolidating. She finds out that she can refinance the loans into a $10,000 consolidation loan to lower her monthly payments and she’ll be eligible to extend her payments over 8 years. But because she’s extended the life of her loans, she’ll be paying interest over a longer period of time and may wind up paying more overall than if she had kept her loans as they were.

It is tempting to pay less per month but if you can afford to pay off your loans in a shorter period of time, then you’ll likely save money on interest in the long run. Obviously every situation is different and you won’t find all your answers in a short article like this. But if you think loan consolidation might be right for you, check out the Student Loan Network’s site at for more information or speak with a loan officer or financial planner to see what your options are.

Monday, November 13, 2006

Are you ready to be Financially Free?

Most of us learn about money at home,that is mainly from our parents. They simply say "Stay in school and Study hard so that you could get a good paid job". Thus, we may graduate with excellent grades but with a poor financial mind-set.
That is why so many high-income professionals,doctors,lawyers,athletes and even accountants are basically broke. From outside they may look very rich and "expensive" but in reality they are highly in debts and could not afford to loose their job.Their income could not catch up with their "expensive" living life style and therefore they are basically broke if you add up all their assets minus their liabilities (ie,negative net worth). [read Rich Dad, Poor Dad]
The problem is Money is not taught in schools. We are not taught in schools how to manage our money with a goal to achieve financial freedom. Most of us grew up being programmed that we "have to work hard for money" but not the other way round "money work hard for us".
So, how do we get started?
The financial freedom model is not complicated. In his book Secrets of the Millionaire Mind T Harv Eker laid out four simple elements in the financial freedom model:
(1) Income
(2) Savings
(3) Investment (to generate more Passive Income)
(4) Simplification
Income comes in two forms - Working Income and Passive Income. Working income is the money we earned through our active work, for example our pay check from our day-to-day job.
Working income is important to most of us without which we will not have Savings to generate passive income. However, since working income need our physical involvement we should not totally forcus on it. Passive Income is money that earned without us actively working. In other words, passive income is being earned while we are sleeping or watching our favorite TV programmes.They include dividend income from our stocks, interest income from time deposit, rental income from real estate etc.. We should pursue Passive Income earnestly, as this is when our Passive Income exceeded our living expenses we attained the Financial Freedom.
Savings is so important. Without savings we can't go to the next stage - Investment. You can earn a lot of money but if you don't keep any of it, you will never create wealth. Financial Freedom is not how much money you have but is more about how much money you could keep and grow. Delay your immedaite gratification to achieve long term financial goals.
Invest your savings wisely so that to grow your money. Every dollar in your bank is your employee so make sure they work hard for you. Generally, the better you are good at investing, the faster your money will grow and generate a greater net worth (I will show you how in my future postings, so stay tuned).
Simpliciation in my own words is having a cost of living that substainable by our Passive Income. Remember, our utlimate goal is to be financially free and have time to do things that we always like to do. Thus, if you want to have three vacation homes then go out to find enough passive income to support this financial committment. If you can't stay put at where you are first, but do not forget your dream of having three vacation homes.
Harv's book Secrets of the Millionaire Mindis a good book to start to get our mind-set ready to be financially free. I hope you will benefit from his book and get ready to be financially free, it is easy and sometime is fun just like a football game.
To your success and happiness.

Saturday, November 11, 2006

Rich Dad Smart Kid - Introduction

Dear Readers,

As every human being on this earth work hard to earn money and fulfill there dreams. Our day to day activity starts and ends with money. Let me ask one question, Does school teaches us the importance of money or finance which is required in actual life? I am sure like me many of you will agree that we always got advice from our parents, teachers and relatives that work hard, get good grades and have a nice highly paid job. Well many of these kind of question I got answered in "Rich Dad Poor Dad" book by Robert T. Kiyosaki's
I will brief about the book in coming few days.