Great Advice For Loan Repayment

Introduction

Every year, there are tons of students and parents who apply for loan repayments. Over the years, this process has helped a lot of people in terms of reducing their struggle in paying loans. Loan repayment is the process where ones money is reserved or kept by a certain company or at times, a university. Its main purpose is to lessen the amount to pay or simply payment amount reduction. It can cover the loans interest or its principal or both. Clearly, this process is a key into making your loans quite more bearable.

 All loan repayments certainly give out benefits to those who apply for it. The question now is: which one is the perfect loan for you?  The first thing to do before even considering a plan is to know if your current federal student plan allows it. Unfortunately, not all federal loans permit loan repayment. It is, of course, best to first check before going through all the processes of applying for a certain plan.

Step 1

The standard repayment plan ensures monthly payments that cover interests and a percentage or a portion of the loans principal. These monthly payments are fixed and is payable for no more than ten years. If one has a stable source of income, this plan may be considered.

 

Step 2

The extended repayment plan is great if you want lower monthly payments. The disadvantages are not all are qualified to use this plan, the time period of payment may take up to twenty-five years and though this plan lowers the cost of payment every month. The overall loan cost is actually higher.

Step 3

The graduated repayment plan starts with low payments, but then they increase after a certain period, usually, after every two years. This plan also covers a percentage of the interest or the principal. This plan is advisable for those who want a lower monthly payment. It is actually more manageable than the first plan.

Step 4

The income-sensitive repayment plan is available for those with FFELP student loans. This plan greatly lowers your monthly costs, but it greatly increases the total interest cost of your loan as well. What adds up to its pressure is that it must be payable by ten years only. The good thing is, monthly payments vary from ones income levels. Payments may either increase or decrease depending on the borrower's income.

Step 5

The income-contingent repayment plan payments are based on your annual income and your spouses (if applicable), the family size or the number of dependents and total amount of your loans. This plan is for Direct Loans only and is only payable up to twenty-five years. This loan will be an advantage for those who have greater number of dependents.

Step 6

The income-based repayment plan is available if you experience a partial financial hardship or if your student loan is just as high as your income. The monthly payment rates can be adjusted yearly. This repayment plan is payable up to twenty-five years. If the loan is not fully paid by then, the balance may be qualified for loan forgiveness. So if you are short on funds, this is the ideal plan to take.

Tips

• It is important to consider ones income or financial capacity before choosing a plan.
• Remember that regardless of the plan, ones monthly cost can be adjusted every year basing it from ones financial situation.
• Smaller monthly payments mean higher total cost. If one has the income to settle for the usual monthly cost and not the lower-priced one, then do so.

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