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Budgeting (Blog or Resources)

Best Apps for Budgeting in College

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Managing money is hard, but budgeting in college? That’s a whole different ballgame. For a lot of students, you have so much to worry about with classes, work, and other involvements that finances often slip your mind. So how do you hold yourself to a budget when you can barely remember to feed yourself dinner? Luckily, we live in an age full of apps to help you get a jumpstart on budgeting and money management. Here are a few of our favorites.

 

Mint®. Mint is a free mobile app where you can view all of your banking accounts in the same place. It automatically updates and puts your transactions into categories so you can see where all your money is going – and where it’s coming from. It also recommends changes to your budget that could help you save money. Its features include a bill payment tracker, a budget tracker, alerts, budget categorization, investments, and security features.

 

PocketGuard®. Like Mint, PocketGuard allows you to link your credit cards, checking, and savings accounts, investments and loans to view them all in one place. It automatically updates and categorizes your transactions so you can see real-time changes. PocketGuard also has an “In My Pocket” feature that shows you how much spending money you have remaining after you’ve paid bills and set some funds aside. You can set your financial goals, and this clever app will even create a budget for you.

 

Wally®. This personal finance app is available for the iPhone, with a Wally+ version available for Android users. Like other apps on this list, it allows you to manage all of your accounts in one place and learn from your spending habits. You can plan and budget your finances by looking at your patterns, upcoming payments and expenses, and make lists for your expected spending.

 

MoneyStrands®. Once again, with this app, you’ll have access to all the accounts you connect. Its features allow you to analyze your expenses and cash flow, become a part of a community, track and plan for spending, create budgets and savings goals, and know what you can spend without going over budget.

 

Albert®. A unique feature that Albert emphasizes is its alert system. When you’re at risk for overspending, the app will send you an alert. The app also sends you real-time alerts when bills are due. Enjoy a smart savings feature, guided investing, and the overall ability to visualize your money’s flow and create a personalized budget.

 

Before you download any budgeting app, make sure you check out the reviews and ensure it’s legitimate. Because a lot of apps ask for your personal financial information, it’s essential you verify their legitimacy before entering your account number. Listen to what other people have to say and then choose the option that works best for you, because not every app will be perfect for everyone. Budgeting in college may be hard, but downloading an app is just one way you can make it easier. Maybe you don’t want to use an app at all. If you’re in that boat, you can check out some other approaches to budgeting here or here.

 

Note: Links to other websites are provided as a convenience only. A link does not imply SouthEast Bank’s sponsorship or approval of any other site. SouthEast Bank does not control the content of these sites.

Motivating your student to apply for scholarships

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Do you find your child lacking motivation when it comes to finding grants and scholarships? While some students are intrinsically motivated and will search out and apply for scholarships on their own, other students may need a little encouragement in order to accomplish these tasks. While it can be frustrating, it’s important to remember that this is likely the first time your child has had to navigate financial waters. Because of that, we’re sharing some simple ways you can motivate your child to apply for scholarships before and during their college years.

Discuss college costs and finances with your child.

Your student may not fully understand how much college can cost. Hold an honest discussion with your child where you review the costs of their top college choices, how much money (if any) you will be able to contribute, the significance of creating a college budget, the realities of student loans, etc. While they may be more focused on which clubs they’ll join and their newfound freedom, helping them understand the importance of financial help can make their college year much more enjoyable.

Share scholarship success stories.

Sometimes, all it takes to motivate your student to apply for scholarships is sharing how their peers are reducing the cost of college. Ask other parents which scholarships their child was able to secure, and even let your child know the lump sum their friend was able to save. Take note of the steps each student performed in order to obtain the scholarships and go over with your student ways they can implement strategies into their application process.

Assist with developing a scholarship organization plan.

When it comes to applying for college scholarships, it pays to be organized. From deadlines to account passwords to application requirements, your student will have a multitude of details to remember. Developing a scholarship organization plan will help deter your child from becoming overwhelmed, which in turn will motivate them to complete applications. Share these organization tips with your child to make the process of applying for scholarships a little easier.

Provide incentives.

Using extrinsic motivators, such as rewards, can prod your student into action. Just as you may have bribed your toddler during the toilet training phase, that same concept should work with your teenager. Consider making a deal with your child that if she applies for a certain amount of scholarships, then you will provide half of the money so she can purchase that new phone or outfit for which she has been saving up money.

Give your child a free pass.

Most teens would gladly give up their household chores to complete other tasks, even if the task involves academics. Allow your child a free pass on chores if they use that time to search out and complete scholarship applications.

Set realistic goals.

If you expect or nag your child to spend most of her free time looking for scholarship leads and filling out applications, no wonder they aren’t motivated. Work with your student to set realistic goals for the number of hours spent each week on the scholarship application process.

Acknowledge and encourage your child’s efforts.

Positive encouragement can work wonders to increase your child’s motivation. By letting your child know that you have seen and appreciate their efforts to apply for scholarships, you are giving them the confidence they need to continue applying for more.

For more information about scholarships, be sure to read the scholarships and grants from our friends at eCampus Tours. Your teen can also perform a free scholarship search by clicking here.

 

Note: Links to other websites are provided as a convenience only. A link does not imply SouthEast Bank’s sponsorship or approval of any other site. SouthEast Bank does not control the content of these sites.

5 Financial Tips for After You Refinance Student Loans

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The process of refinancing student loans can be like studying for finals: you prepare for weeks, the stress keeps you up at night, and once the big day finally passes, you feel a huge sense of relief. You might even go out with friends to celebrate. But like college, you can’t just forget what you learned. You have to apply that knowledge to the next step. 

 

When it comes to refinancing student loans, the next step is to continue honing your financial savviness. Find other ways to reduce and quickly pay off debts so you can start spending money on the things you want, instead of the things you need! Below are five tips to consider after refinancing student loans. 

Pay Down Other Debts

Take the extra amount you paid toward that student loan and apply it to other debts. With a $50,000 loan at an 8% interest rate, you could owe approximately $480/month for 15 years. Your total interest over the life of the loan is $36,000. But if you’re able to reduce that interest rate to just 6%, your monthly payment drops to $420/month and the total interest paid is $26,000. What could you do with an extra $60/month? What could you do with an extra $10,000 over 10 years? A lot. 

 

Consider all the types of debt and ongoing expenses you have that you could apply that $10,000 toward:

  • Credit cards
  • Car loans
  • Home loans
  • Medical bills
  • Childcare
  • Cell phone bills
  • Utility bills

 

You can also opt to keep that extra money aimed at your loan. Refinancing student loans often establishes terms with no prepayment penalties. So paying off loans faster can alleviate the burden of debt. This can take many forms, including:

  • Make an extra payment: In addition to your minimum monthly payment (12 payments a year), consider an extra payment every few months. In the example above, if you save $60/month on your refinanced student loan, you will have enough money for a whole extra payment every 7 months, with no additional work done on your part. Just a little saving!
  • Pay more than the minimum: If you don’t want to worry about orchestrating extra payments, overpay during each regular monthly payment. By going above and beyond the minimum payment, you’ll keep from accruing as much interest on your principal balance. Going back to our example again, if you were to keep that extra $60 applied to your monthly payment of $420 (for a total of $480), you could pay off your loan 2–3 years earlier at a savings of $5,000. It might seem tempting to use that extra $60 as play money right now, but $5,000 could be an even bigger play day in the future!
  • Make single lump-sum payments: Use your tax return, annual bonus, or an inheritance to make lump-sum payments toward the principal balance on your refinanced student loan. Again, the mindset here is to pay off that loan as fast and comfortably as you can.  

Negotiate Other Bills or Debts

Don’t stop while you’re on a roll. Once you secure better terms for your loan, find other ways to lower your bills. Use that financial savvy you picked up refinancing student loans, and negotiate with other debt collectors. This negotiation isn’t limited to loans—you can often get better rates with your cable and internet provider too. 

 

You also likely have a dozen or more automatic monthly payments coming out of your checking account or linked to a credit card. Some banks or apps like Truebill® and Trim® can help you find and cancel subscriptions that are unused or that you forgot you signed up for in the first place. What started as $60/month saved could possibly turn into $150/month after canceling unused subscriptions. 

Consolidate Credit Card Debt

You can consolidate loans, but did you know you can also consolidate credit card debt? If you have multiple cards that you owe money on, you can roll those cards into a single loan. Depending on your credit score and other factors, a consolidated loan can have lower interest or a lower, more achievable payment. You could also take out a personal loan with a lower rate to pay off cards directly with the credit card company.

Keep At It

Refinancing only sounds like the hard part. The real challenge comes after you sign the papers. Getting a new interest rate and a new loan term won’t save you money if you don’t make on-time payments and pay off your loan according to those new terms. Adult life has a lot more things on its to-do list. Set up automatic payments so you don’t risk forgetting. At the very least,   set monthly reminders in your calendar app to write a check or manually process your payment. 

Tell Your Friends

ELFI offers options for student loans and refinancing student loans. But did you know ELFI also has a referral program1 that can help you make (and save) even more money? Sign up and create a personalized referral link to share with friends or family. When someone refinances using your link, you’ll get a $400 referral bonus check and your friend will receive a $100 credit toward the principal balance of an Education Loan Finance loan. There’s no limit on the number of people you can refer. Learn more at elfi.com/referral-program-student-loan-refinance.

 

 

Note: Links to other websites are provided as a convenience only. A link does not imply SouthEast Bank’s sponsorship or approval of any other site. SouthEast Bank does not control the content of these sites.

 

Terms and conditions apply. Subject to credit approval.

 

1Subject to credit approval. Program requirements apply. Limit one $400 cash bonus per referral. Offer available to those who are above the age of majority in their state of legal residence who refer new customers who refinance their education loans with Education Loan Finance. The new customer will receive a $100 principal reduction on the new loan within 6-8 weeks of loan disbursement. The referring party will be mailed a $400 cash bonus check within 6-8 weeks after both the loan has been disbursed, and the referring party has provided ELFI with a completed IRS form W-9. Taxes are the sole responsibility of each recipient. A new customer is an individual without an existing Education Loan Finance loan account and who has not held an Education Loan Finance loan account within the past 24 months. Additional terms and conditions apply.

The Best Financial Websites & Podcasts

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Navigating the world of personal finance is no easy task. Learning how to manage your money can be difficult, especially as a recent college graduate or young professional. You’re going through so many changes, and the whole world is at your feet, but you also sometimes feel the weight of the world on your shoulders. So don’t let your money become a guessing game. To help you out, we’ve gathered some of our favorite websites and podcasts you can turn to for financial advice. 

 

NerdWallet

Founded by Tim Chen in 2009, NerdWallet’s mission is to provide clarity for all of life’s financial decisions. NerdWallet has grown from a credit cards comparison spreadsheet in 2009 to a go-to source for millions of people when it comes to making financial decisions. NerdWallet’s tailored advice, content and tools ensure you’re getting more from your money, covering the topics of credit cards, banking, investing, mortgages, loans, insurance, money and even travel. 

 

The Simple Dollar

Originally founded by a man on a journey to get out of debt, this website has flourished over the past eleven years and become a well-respected source of financial advice. The site provides practical tips for money management. The Simple Dollar’s mission is “providing well-researched, useful content that empowers our readers to make smart financial decisions.” Staying true to that mission, it serves millions of readers and has been featured in major publications, including Forbes, Business Insider, and TIME. 

 

Suze Orman

New York Times bestselling author & financial expert, Suze Orman, offers advice through a variety of channels, including books, live events, blogs, and podcasts. Her website includes a wide range of resources, from student loans to family and estate planning, and everything in between. More than 1 million followers glean knowledge from her every week on Twitter, where she shares financial tips and links to other work, such as her podcasts and blogs.

 

Kiplinger

This Washington, D.C.-based publisher releases more than just personal finance tips. The company creates print and online publications featuring business and economic forecasts, as well. The monthly personal finance magazine shares advice for money management, investment, retirement, taxes, insurance, real estate, auto purchases, health care, travel, and paying for college. According to its website, Kiplinger Magazine was the first magazine that offered money management advice for Americans, so this organization has a long and proud history as a financial resource.

 

Your Business, Your Wealth

This podcast is led and hosted by financial advisors with nearly two decades of experience.

Its episodes cover a wide range of topics, from insurance, to taxes, to entrepreneurship, to debt, and beyond. In reviews, listeners rave about the way the hosts explain financial concepts that people can apply to their lives. Here’s just one review from an Apple Podcast Listener:

The hosts also share inspiration on Twitter

 

Radical Personal Finance

Radical Personal Finance aims to not just provide general financial information but to encourage listeners to take actionable steps to improve their finances and lifestyles. The show also strives to equip its listeners with enough information to be able to think critically and make sound decisions for themselves. According to its reviews, listeners enjoy the unique perspectives this podcast brings to the table.  

 

While you may not always agree with everything the podcast hosts say or the blog editors write, listening to a more experienced point of view is always helpful. You can take some of the tips in these blogs and podcasts and immediately apply them to your personal finance routine. Make some of these a daily part of your routine and you’ll find you’re learning more about money than you ever dreamed. 

 

We live in a time when our attention spans are being divided more and more thinly. We wanted to share our favorite podcasts and financing websites because they’re easy to consume on-the-go. There’s no need to set aside time in your busy schedule. These resources are available on the commute to work, during your lunch break or any time you want to sharpen your financial know-how.

 

If you’re interested in a private student loan or refinancing your student loans, our Personal Loan Advisors are available and would love to speak with you and answer any other questions you may have. Let’s connect.*

 


 

*Subject to credit approval. Terms and conditions apply.

 

NOTICE: Third Party Web Sites

 

Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.

How Does Student Loan Interest Work?

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When you take out a student loan, you will not just be paying back the amount you borrowed – the lender will also charge you interest. The easiest way to think of interest is that it’s the cost paid by you to borrow money. Whether you take out a private student loan or a federal student loan, you will be charged interest on your loan until it is repaid in full. So, when you have finished paying off your loan, you will have paid back the original sum you borrowed (your original principal), plus you will have paid a percentage of the amount you owed (interest). Properly understanding the way that student loan interest affects your loan is imperative for you to be able to manage your debt effectively.

 

The Promissory Note

When a student loan is issued, the borrower agrees to the terms of the loan by signing a document called a promissory note. These terms include:

  • Disbursement date: The date the funds are issued to you and interest begins to accrue.
  • Amount borrowed: The total dollar amount borrowed on the loan.
  • Interest rate: How much the loan will cost you.
  • How interest accrues: Interest may be charged on a daily or monthly basis.
  • First payment date: The date when you are expected to make your first loan payment.
  • Payment schedule: When you are required to make payment and how many payments you have to make.

 

How Different Types of Student Loans are Affected by Interest Rates

  • Government-Subsidized loan: If you are the recipient of a government-subsidized direct loan, the government will pay your interest while you are in school. This means that your loan balance will not increase. After graduation, the interest becomes your responsibility.
  • Parent PLUS Loan: There are no government-subsidized loans for parents, and regular repayments are scheduled to begin 60 days after the loan is disbursed.
  • Unsubsidized Loan: The majority of students will have unsubsidized loans where interest is charged from day one. If you have this type of loan, sometimes a lender will not require you to make payments while you are still in school. However, the interest will accrue, and when you graduate you’ll find yourself with a loan balance higher than the one you started with. This is known as capitalization. 

Here’s an example: In your freshman year, you borrow $7,000 at 3.85%. By the time you graduate in four years, this will have grown to $8,078 – an increase of $1,078. Here’s the math: 7,000 × 0.0385 × 4 = $1,078 (Click here for ELFI’s handy accrued interest calculator.)

 

How is Student Loan Interest Calculated?

When you begin to make loan payments, the amount you pay is made up of the amount you borrowed (the principal) and interest payments. When you make a payment, interest is paid first. The remainder of your payment is applied to your principal balance and reduces it. 

 

Let’s suppose you borrow $10,000 with a 7% annual interest rate and a 10-year term. Using ELFI’s helpful loan payment calculator, we can estimate your monthly payment at $116 and the interest you will pay over the life of the loan at $3,933. Here’s how to determine how much of your monthly payment of $116 is made up of interest.

 

1. Calculate your daily interest rate (also known as your interest rate factor). Divide your interest rate by 365 (the number of days in the year).

 

.07/365 = 0.00019, or 0.019%

 

 

2. Calculate the amount of interest your loan accrues each day. Multiply your outstanding loan balance by your daily interest rate.

 

$10,000 x 0.00019 = $1.90

 

3. Calculate your monthly interest payment. Multiply the dollar amount of your daily interest by the number of days since your last payment.

 

$1.90 x 30 = $57

 

How is Student Loan Interest Applied?

As you continue to make payments on your student loan, your principal and the amount of accrued interest will decrease. Lower interest charges means that a larger portion of your payments will be applied to your principal. Paying down the principal on a loan is known as amortization.

 

How Accrued Interest Impacts Your Student Loan Payments

The smart money approach is avoiding capitalized interest building up on your loan while you are in school. This is because choosing not to pay interest while in school means you will owe a lot more when you come out. The more you borrow, the longer you are in school, and the higher your interest rates are, the more profound the impact of capitalization will be.

 

How to Find the Best Student Loan

When looking for the best student loan, you naturally want the lowest interest rate available. With a lower interest rate, the same monthly payment pays down more of your loan principal and you will be out of debt more quickly. Talk to ELFI about our private student loan offerings by giving us a call today!

 

Learn More About ELFI Student Loans

 

Terms and conditions apply. Subject to credit approval.

 

NOTICE: Third Party Web Sites

Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.

The Importance of a Good Debt to Income (DTI) Ratio

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It is evident to most people that having more income and less debt is good for their finances. If you have too much debt compared to income, any shock to your income level could mean you end up with unsustainable levels of debt. Every month you have money coming in (your salary plus additional income) and money going out (your expenses). Your expenses include your recurring bills for electricity, your cell phone, the internet, etc. There are also regular amounts that you spend on necessities, such as groceries or transportation. On top of all of this, there’s the money you spend to service any debts that you may have. These debts could include your mortgage, rent, car loan, and any student loans, personal loans, or credit card debt.

 

What is the Debt-to-Income Ratio (DTI)?

The Debt-to-Income Ratio (DTI) lets you see how your total monthly debt relates to your gross monthly income. Your gross monthly income is your total income from all sources before taxes and other deductions are taken out. Below is the formula for calculating your DTI:

DTI = (Total of your monthly debt payments/your gross monthly income) x 100

 

Example: Let’s suppose the following. Your gross monthly income is $5,000, and you pay $1,500 a month to cover your mortgage, plus $350 a month for your student loans, and you have no other debt. Your total monthly payments to cover your debts amounts to $1,850.

 

Your DTI is (1,850/5,000) x 100 = 37%

Here’s a handy calculator to work out your DTI.

 

Why is Your DTI Important?

Your DTI is an important number to keep an eye on because it tells you whether your financial situation is good or if it is precarious. If your DTI is high, 60% for example, any blow to your income will leave you struggling to pay down your debt. If you are hit with some unexpected expenses (e.g., medical bills or your car needs expensive repairs), it will be harder for you to keep on top of your debt payments than if your DTI was only 25%.

 

DTI and Your Credit Risk

DTI is typically used within the lending industry. If you apply for a loan, a lender will look at your DTI as an important measure of risk. If you have a high DTI, you will be regarded as more likely to default on a loan. If you apply for a mortgage, your DTI will be calculated as part of the underwriting process. Usually, 43% is the highest DTI you can have and likely receive a Qualified Mortgage. (A Qualified Mortgage is a preferred type of mortgage because it comes with more protections for the borrower, e.g., limits on fees.)

 

So, What is a Good DTI?

If 43% is the top level DTI necessary to obtain a Qualified Mortgage, what is a “good” DTI? According to NerdWallet, a DTI of 20% or below is low. A DTI of 40% or more is an indication of financial stress. So, a good rule of thumb is that a good DTI should be between these two figures, and the lower, the better. 

 

The DTI Bottom Line

Your DTI is an essential measure of your financial security. The higher the number, the less likely it is that you’ll be unable to pay down your debt. If there are months when it seems that all your money is going toward debt payments, then your DTI is probably too high. With a low DTI, you will be able to weather any financial storms and maybe even take some risks. For example, if you want to take a job in a field you’ve always dreamed about but are hesitating because it pays less, it will be easier to adjust to a lower income. Plus, debt equals stress. The higher your DTI, the more you can begin to feel that you’re working just to pay off your creditors, and no one wants that.

 

DTI and Student Loan Refinancing

Your DTI is one of several factors that lenders look at if you apply to refinance your student loans. They may also assess your credit history, employment record, and savings. Refinancing your student loans may actually decrease your DTI by lowering your monthly student loan payment. This may help you, for example, if you want to apply for a mortgage. ELFI can help you figure out what your DTI is and if you are a good candidate for student loan refinancing. Give us a call today at 1.844.601.ELFI.

 

Learn More About Student Loan Refinancing

 

Terms and conditions apply. Subject to credit approval.

 

NOTICE: Third Party Web Sites

Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.

Should You Pay Off Student Loans Immediately or Over Time?

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When you start your post-college career, you may be tempted to breathe a sigh of relief. Before you do that, you have important decisions to make. You’ll have to stretch your paycheck to cover your new lifestyle and associated expenses: a furnished home or apartment, vehicle, insurance, and hopefully a 401K contribution. If you are like 70% of college graduates, you also have student loans that need to be repaid.

 

In most situations, it’s going to be most beneficial to pay off your loans as quickly as possible so that you are paying less towards interest. The average college graduate’s starting salary, however often cannot allow for enough additional income to cover more than the regularly scheduled student loan payments.  Most student loans have a six-month grace period so you can do some budgeting and planning first – if you need to. We don’t suggest using the grace period unless you find it necessary to organize your finances. During a deferment such as a grace period, the interest could still be accruing depending on the type of loan that you have.

 

If you determine that you may be better off establishing sound financial footing and a workable monthly budget before you begin repaying those daunting loans. Keep these tips in mind as you formulate a strategy for debt payoff.

 

Student Loans Have Advantages

Varying types of debt are governed by different laws and regulations. Banks often base interest rates for consumer credit loans on your established credit rating. Interest rates for auto loans or credit card debt tend to be higher than a mortgage or student loan interest. As you review your debt load and make a plan, remember: student loan debt comes with a few “advantages” that other types of debt don’t offer.

 

  • Preferential tax treatment: With a new job, you will be paying taxes on your income. Student loan interest is deductible up to $2,500 and can be deducted from pre-tax income.
  • Lower interest rates & perks: Federal student loans have lower interest rates and are sometimes subsidized by the government.
  • Lender incentives: Private student loans may come with incentives from the lender that make them a better deal than other credit types. These include fee waivers, lower interest rates, and deferment options.
  • Flexible payment plans: Options for lower payments and longer terms are available for both federal and private student debt.
  • Build your credit score: You can build your credit score with student loan debt. Now, depending on whether you’re making on-time payments or not, you could negatively or positively affect your credit. If you chose to make small payments during deferments, or a grace period, and regular on-time payments you will be more likely to establish a favorable credit record and reduce the amount of interest you pay overall.

 

Programs to Help You With Student Loan Payments

There are few options for loan forgiveness with regular debt, but student loans offer opportunities to reduce or eliminate your debt. These may come with commitments and tax implications, so be sure you fully understand them if you decide to take advantage of these programs.

 

  • Loan forgiveness: Federal student loans may be forgiven, but you’ll want to be sure that you’re following all of the requirements needed of the program. Be sure before choosing this option that the federal loans you have qualify for the program. Also, keep in mind there could be taxes due on the amount that is forgiven. Some student loan forgiveness programs include PAYE (Pay as You Earn) and REPAYE (Revised Pay as You Earn), Public Service Loan Forgiveness, and Teacher Loan Forgiveness.
  • Loan Consolidation: Multiple student loans can be consolidated into one payment with the interest rate determined by a weighted average of your current loans – interest rates. Combining multiple loans may be easier to manage on a modest starting salary. Consolidating federal loans usually doesn’t require a good credit score, either.
  • Refinance, and you could achieve a lower interest rate: Lenders like Education Loan Finance specialize in student loan refinancing, and have options like variable interest rates and flexible terms. Refinancing your debt could make student loan debt easier to manage than other types of credit.

 

Pay Off High-Interest Debt First

Before you decide to pay off your student loans, think about the financial obligations you’ll be taking on. Instead of carrying a credit card balance or making low payments for an auto loan, it makes sense to continue your low student loan payments and pay off more expensive debt first or debt with a higher interest rate. In the long run, you’ll save money and build your credit score.

 

If you still have doubts about not paying off student debt first, consult a professional financial advisor for help prioritizing your goals and setting up a budget that lets you achieve them.

 

Click Here to Learn More About Student Loan Repayment

 

 

How to Build Your Child’s Credit Score When They Don’t Have One Yet

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From the 2007 Housing Crisis, 2008 Stock Market Crash, and now the student debt crisis there is no surprise parents nationwide are looking to educate and protect their children on finances. Many people during these national events lacked basic financial know-how and self-discipline. Gen-Xers and millennials, starting to have children of their own, worry that a new generation could be seduced by the allure of instant gratification and the digital disconnect between earning and spending money. What as a parent can you do for a young child to teach them finances and help them learn the basics? Here are some basic tips to help your children build healthy credit and learn to use it responsibly.

 

Start With Basic Financial Life Lessons

Whether your child is 2 or 22, financial education is the key to building good credit and financial independence. Erin Lowry, business blogger and author of Broke Millennial: Stop Scraping By and Get Your Financial Life Together, explained in a recent podcast that her parents taught her about delayed gratification early in life. “I was really encouraged from a very young age to start making money, especially if I wanted something,” Lowry said.

 

Saving for discretionary purchases is a lesson many young children can miss. A growing number of young adults also don’t have realistic expectations of their future earning power. Lowry grew up in a different reality. She explains that her first successful enterprise was at age 7, selling doughnuts at a family garage sale. Before she could feel too excited about her earnings, her father adjusted the amount she made by taking out the cost of the doughnuts and wages for her sister. He explained that the money left was her profit. “He actually took the money,” she remembers. “That is something that has stuck with me forever.”

 

It’s never too late to teach lessons like these. Resources for financial education are abundant in print and online, and parents can refer adult children to Lowry’s book and her blog, brokemillennial.com. For younger children, check out this post by Dave Baldwin, “The Five Best Apps for Teaching Kids How to Manage Their Money.”

 

Three Tips for Establishing Good Credit for Your Children

Parents with good credit and a clear vision of their children’s financial future can take these three actions to ensure a sound credit score for children reaching adulthood.

 

TIP 1: Make your child an authorized credit card user.

There is no minimum age to most credit cards, so you can add your child as an authorized user as early as you like. The best part is you do not have to give the child access to the card, just keep it in a safe place. It’s imperative that you use the credit card wisely and are able to pay the minimum monthly balance on the card. If you are unable to make payments on the card that could negatively affect your child’s credit history too. Try to only use the card for reoccurring balances like gas or food shopping.

 

When your child comes of age to have their first credit card in adulthood, they will benefit from your history of timely payments and reasonable use of credit. It will also benefit them if they need a loan to attend college and you as a parent may not need to be a cosigner.

 

TIP 2: Add a FREE credit freeze to your child’s credit report until they reach age 18.

Contact each of the three reporting agencies, Equifax, Experian, and TransUnion, to request a freeze in your child’s name. In some states, the freeze may need to be renewed every seven years. A credit freeze is fairly simple to implement and will protect your child from identity theft, which in turn will protect their credit history and credit score. You can also lift credit freezes when your child is ready to apply for credit.

 

It may seem like an extreme to put a credit freeze on your two months old credit but it will only protect them in the long run. Identity theft to children is an unfortunate reality in the United States. According to CNBC, more than 1 million minors were victims of identity theft or fraud in 2017. What may be even more surprising is that data breaches are just as much a problem for minors as for adults, if not more. According to CNBC, only 19% of adults were fraud victims compared to a staggering 39% of minors due to data breaches. This can happen to your child, but it can be prevented. You have the power to protect your children from falling victim to fraud. Not to mention a credit freeze is free thanks to recent laws passed by the federal government, so it won’t even cost you or your family a dime.

 

To learn more about protecting your child’s credit and preventing identity theft, visit the Federal Trade Commission’s Consumer Information site.

 

TIP 3: Set up a secure credit card account for your child to use.

A secure credit card is similar to an unsecured or the “normal” type of credit card. The only major difference is that a deposit is used to open a secured credit card account. The amount of secured credit card deposit is usually the credit limit of that secured credit card. Now, as long as all payments are made on time and in full at the end of the designated period you’ll receive your deposit back. Additionally, that fact that all payments were made on time and in full means that you should see that reflected in your credit report and you may even see that reflected in your credit score. If your child fails to make on-time payments or fails to pay the full amount of the card this could hurt your child’s credit instead of helping it.

 

If you choose to give your teenager a secured credit card you should be certain that you discuss the responsibilities of card with them. Make sure your child is committed to paying on time, staying within the credit limit, and using the card for only appropriate expenses you have discussed in advance. This is a great responsibility to provide a teenager because it really gives them the ability to start developing good financial habits. Whether that is putting an alert in their cell phone when the payment is due or if that is handwriting it on a calendar. Additionally, your child will have the opportunity to really learn to budget and live within their means. These are fundamental finance lessons and habits that will help to lay the groundwork of what could be a very financially responsible young person.

 

Financial Outlook

 

Regardless of what ways you choose to teach your child about credit or build their credit, know that your outlook on finances can easily become your child’s. If you find yourself scared of money, it’s likely your child will too. So often children learn relationships based on what they see their parents doing, so be sure that you’re laying the right framework for them to be successful. It doesn’t have to be an overly complex and if you aren’t sure that what you are teaching them is correct try looking locally for classes or programs. You should be able to find some financial literacy courses either online or within your local community. These can really help your child to familiarize themselves with common financial terms and create good financial habits. Good financial habits include how to save money, charitable giving, and even what taxes are.  No one knows your child better than you and no one wants them to succeed more than you, so be sure to give them the right tools and resources to do so.

 

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Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.

What’s a Credit Freeze?

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What does buying a house, applying for a student loan, and getting a personal loan all have in common? They are all different forms of credit. Credit is provided to you by a financial lender.  That lender will utilize your credit report in order to evaluate your credit history to decide if you qualify for credit with them. While evaluating your credit history and credit score they will do an inquiry on your credit. This inquiry can affect your credit score and can be placed on a report depending on the type of inquiry that’s completed by the institution. It’s essential to know the two different types of credit inquiries, what a credit freeze is, how it relates to a credit inquiry, the benefits of a credit freeze, and how to put one in place and remove it.

 

What Is a Credit Inquiry?

 

According to myFICO.com, a credit inquiry is a “request by a ‘legitimate business’ to check your credit.” These checks are categorized as either “hard” or “soft” inquiries, which we’ll break down in more detail later. “Credit pulls” are often a casual term used to describe both types of inquiries which gives a person, lender, or company the ability to view your credit report and see your credit score. Both types of credit pulls are included on your credit report but, only you can see the soft inquiries.

 

For example, imagine you’re looking for a mortgage. Let’s say that a credit card company recently did multiple soft credit inquiries on your account to “pre-qualify” you for a new credit card promotion that they have. When the mortgage company you submitted an application too reviews your credit report, they will not see the soft credit inquiries completed by the credit card company.  Additionally, the soft inquiries that were completed by the credit card company will not affect your credit score.

 

Regardless, the type of credit you’re opening, obtaining credit takes time, careful consideration, and patience. Each time a lender accesses your credit score and credit report to make a decision, you run the risk of damaging your creditworthiness. So what types of credit inquiries will affect your credit report and credit score? What type of credit inquiry are they, soft credit pulls or hard credit pulls?

 

 

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Soft Credit Inquiries vs. Hard Credit Inquiries

 

There are many differences between soft credit inquiries and hard credit inquiries. For example, soft credit inquiries can be part of the employment process if you are applying to a financial institution. Soft credit inquiries won’t affect your credit score, and they won’t show up on a credit report. Soft credit inquiries can be done without your permission. You may be wondering, “who’s sitting around running my credit report on a Saturday night?” Involuntary checks on your credit report will typically come from financial lenders who want to market a “pre-qualified” offer to you. We’ve all seen these types of mailers that you get from unfamiliar companies that say “Hey, you’ve pre-qualified for an auto loan! Here’s your special code go sign up today!” Soft credit inquiries usually consist of employment verification checks, pre-qualified credit card offers, when you check your credit score, and pre-qualified insurance quotes. Now, we know what a soft credit inquiry or soft credit pull is, but what is a hard credit inquiry or hard credit pull?

 

 

Hard credit inquiries are usually completed for larger banking requests like submitting an application for a mortgage. For example, you’d submit an application if you were applying for a mortgage, personal loan, auto loan, or student loan, among other types of loans. After having a hard credit inquiry completed there is a chance that your credit score may be affected. Multiple hard credit inquiries can affect your credit score negatively and all the hard credit inquiries will be visible on your credit report. These inquiries can show up on your credit report for up to two years after the inquiry is completed.

 

Typically when you’re submitting an application or applying for new credit – it will affect your FICO score if you are applying for a loan with multiple lenders. You should still apply to multiple lenders to find yourself the best interest rates. Now, if you are applying for the same type of credit, it is likely that if the inquiries are done within a certain window, they may be counted as a single inquiry. Inquiries are important to understand because they are the building block to your credit score and credit report which illustrates for lenders your financial wellness. Be sure that you know what you are signing up for before you proceed to submit those application documents. Speaking of financial wellness, what is a credit freeze and how can you benefit from it?

 

What is a Credit Freeze?

A credit freeze is pretty self-explanatory, it’s a freeze or hold that is placed on your credit to stop lenders from completing any inquiries. You may have heard a credit freeze referred to as a security freeze. Having a credit freeze will not impact your day-to-day financial wellness routines. You’ll still have the ability to pull an annual credit report to review it for accuracy. If you want to open up new credit that will require a hard credit inquiry all you need to do is simply lift the credit freeze temporally until it is completed. It’s important to note that though you may have a credit freeze in place, creditors, debt collectors, who actively have an account that belongs to you and government agencies utilizing warrants, and subpoenas will have access to your credit report.  All these simple things to secure your financial wellness and guess what? It gets better, all credit freezes are free!

 

You’re protecting your identity from thieves who may be trying to open accounts in your name, but it doesn’t cost a dime – no brainer! As we learned above, when you’re applying for credit like a mortgage, a lender will need to do a hard credit inquiry. If you’re not expecting to have your credit reviewed, it’s recommended that you place a credit freeze on your account. It’s important to know how to put a credit freeze into action and get it onto your account ASAP to keep those thieves away! Also, if you are a parent of a child under the age of sixteen, you should consider freezing their account too as per the FTC.

 

How to Implement a Credit Freeze

Now it sounds like it’s a lot harder than it actually is to implement a credit freeze. It also sounds way expensive too, but we know thanks to government laws it is free! Here’s how to place a credit freeze with each of the major U.S. credit agencies.

 

Equifax:

Visit https://www.equifax.com/personal/credit-report-services/ to setup an Equifax account.

 

Step 1 –

Provide Personal Information (Name, Date of Birth, Social Security Number, Mobile Number, Address)

 

Step 2-

Create Account Details (Email Address, Password)

 

Step 3-

Verify your identity using a text message or answering financial questions about yourself. My phone was broken, so I got to take my very own financial quiz to confirm my identity.

 

Step 4-

Once the quiz questions are answered you’re queued to sign in.

 

Step 5-

Select “Place or Manage A Freeze”

 

Transunion:

Visit https://www.transunion.com/credit-freeze to setup a Transunion Account.

 

Step 1- Select “Add Freeze”

 

Step 2- Provide Personal Information (Name, Date of Birth, Last 4 Digits of Social Security Number, Address)

 

Step 3- Create an Account

 

Step 4- Verify finance history via questions provided.

 

Step 5- Add Credit Freeze.

 

Experian:

Visithttps://www.experian.com/freeze/center.html and select “Add a Security Freeze”

 

Select Whose Credit You’d like to Freeze

 

Step 1- Provide Personal Information (Name, Date of Birth, Social Security Number, Address, Email Address, Create a Pin)

 

If you are serious about freezing your credit you’re going to want to utilize all three U.S. major credit agencies Equifax, Transunion, and Experian. Most of them provide a pin once the freeze is placed, so be sure that you keep that pin for your records. When you are ready to lift the security freeze or credit freeze you should have it readily available to you.

 

How To Lift a Credit Freeze

 

You can lift a credit freeze or you can choose to remove it altogether. In order to do so, it’s similar to the credit freeze sign up process. You need to contact each credit agency and make a request to remove the credit freeze. As we discussed previously many of the three major agencies utilize a pin, almost like a password, that you’ll need to provide to lift or remove the credit freeze from that bureau.

 

Attaining good credit and working hard to keep your finances healthy, isn’t easy. With all the recent data breaches it is so important to take the necessary steps to protect yourself and your family from those looking to complete identity theft. One incorrect credit inquiry could cause a much bigger problem for you then taking the time to prevent it now. Credit freezes aren’t the only way to protect your credit from thieves if you lifted your credit freeze or removed it fully you may want to look into utilizing fraud alerts.

 

 

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Fraud Alerts for Credit Reports

If you don’t want to freeze your credit but want added security for your credit reports, try fraud alerts. There are three different types of fraud alerts: initial fraud alert, active duty fraud alert, and extended fraud alert. What’re the differences between each and what makes them different from a credit freeze?

 

Initial 90 Day Fraud Alert

 

The initial fraud alert is an alert that lasts usually around 90 days and is often used when financial information, credit card numbers, or your wallet have been stolen or even lost. The initial fraud alert gets placed on your credit report. Meaning, if someone is, in fact, trying to steal your identity they will have a difficult time because companies will be required to take additional steps to verify your identity before issuing additional forms of credit. You can place these alerts on your credit report by contacting a credit agency. Once one agency is contacted they must notify the other two U.S. credit agencies. Initial fraud alerts can be renewed after the 90 day period.

 

Active Duty Alerts

 

These alerts are designed for people who are on active military duty. They operate similarly to initial fraud alerts in that they require businesses to complete extra tasks to confirm the borrower’s identity before an additional form of credit can be issued. These types of alerts typically last about 12 months or a year but can be renewed to match the deployment period. When you contact a credit agency, it must notify the other two U.S. credit agencies. Also, according to the FTC, the credit agencies must remove your name from any marketing lists for prescreened credit card offers for two years unless you request otherwise.

 

Extended Fraud Alerts

 

Extended fraud alerts are commonly used if you have already fallen victim to identity theft. Extended fraud alerts last 7 years. In order to place this type of alert on your credit report, you’ll need to send proof of identity theft to one of the three major U.S. credit agencies. Here is a great government resource if you ever fall victim to identity theft.

 

Similarities and Differences between Credit Freezes and Fraud Alerts

 

Fraud alerts and credit freezes have some similarities and unique differences. For example, both alerts and freezes are free of charge according to U.S. federal law. Any current creditors will still have access to your credit report even if you have fraud alerts enabled or you have a credit freeze in place. If you choose to open any new forms of credit while these are enabled it could lengthen the process for the new creditor. These are the similarities but what makes fraud alerts and credit freezes different?

 

One main difference is for a credit freeze each U.S. agency will need to be contacted directly. Whereas, for fraud alerts, if you notify one credit agency, that credit agency is responsible for notifying the other two credit agencies. During a credit freeze, prospective lenders will not have any access to your credit report. With a fraud alert, prospective lenders do have access to your credit report but will need to take additional steps before issuing new lines of credit. The last and one of the most obvious differences between these two is that credit freezes don’t have an expiration date. A credit freeze can be placed on your credit report until the end of time unless you request that it is removed. A fraud alert typically will expire within a year, or seven years depending on the type of fraud alert you’ve selected.

 

 

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Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.

Responsibilities of Cosigning A Loan

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It’s often thought about pretty commonly that people will attend college. What often isn’t discussed is how people will afford to pay for their college degree. When looking for available financial aid options many look to private student loans to pay for college. Once completing the application don’t be surprised if it is denied because of your financial history or lack thereof. Unless your parents opened up a credit card account for you as an authorized user when you born, you probably won’t have a long enough credit history. Don’t be overly heartbroken, since you aren’t the only one without a long credit history. A way around not having an established credit history is to talk with a parent or guardian about being a cosigner on your student loan. This isn’t an easy process, but it can be worthwhile if both parties understand the responsibilities that are associated with cosigned student loans. Additionally, adding a cosigner to a loan may not be the right answer.

 

Having a cosigner can help qualify you for a student loan because the right cosigner should have an established credit history. As a lending institution, it would be too difficult to lend to a borrower who hasn’t yet shown that they are financially responsible. Adding a cosigner who is financially responsible, for a loan assures the lender that the loan is less of a risk and is more likely to be paid back.

 

If you like sports, think of it like a basketball game. If you’re injured and can no longer play, a substitute or someone on the team plays the game in your place. A cosigner would be your financially responsible substitute in the game of loans. If you are unable to carry the financial burden of a loan at any time and take a knee, a cosigner is expected and legally responsible to repay the debt.  Though the concept of adding a cosigner can seem fairly simple, there is a lot that goes along with it. Here are a few things to understand, before you even consider asking someone to cosign your private student loan.

 

 

Why would you need to add a cosigner to a loan?

 

There are multiple different cases why you may need a cosigner. If you have never owned a credit card, had a loan before or held any type of credit, you may have no established credit history. Even if you have had credit for a short time, there may not be enough history for the private loan company to evaluate. If you have a large loan you’re interested in taking out, it’s highly unusual that the loan will be provided to someone with a year or less of credit history. Based on your credit history a student loan company can see how often a person is paying off debt and what their credit score is. Without a credit history, it can be hard for a student loan company to evaluate if you will be on time for loan payments.  With a cosigner, the student loan company can evaluate the financial history of the cosigner and see that they are a reliable applicant.

 

Another reason that you may need a cosigner is that you have a bad credit score. If your debt-to-income ratio is too high, you have an unsteady income, or you have previous defaults on your credit history, this could be a reason why you’d need to add a cosigner. A cosigner can help qualify you for a private student loan. When having a cosigner, it is the cosigner’s loan and they are fully responsible for that loan too. Though your cosigner is not using the loan, it is equally their responsibility to make sure the loan is paid off. If you choose to ask a family member or friend to be a cosigner, it is important they understand the financial responsibility that they are taking. For example, if you do not pay your loan, your cosigner will have to pay it off. A cosigner will need to have a good credit history and consistently have responsible financial habits. You may be thinking of multiple different people who could be your cosigner. Before diving in, be sure to understand who can cosign your loan.

 

Who can cosign a loan for college?

 

When evaluating the need for a cosigner, you will need to know who is eligible. Undergraduate and graduate private loans lenders have a list of criteria that a cosigner must meet. The criteria for a cosigner will be different based on each lending institutions policy and eligibility requirements. Here’s a breakdown of some of the general eligibility requirements needed.

 

  • A cosigner must be a United States citizen and of legal age.
  • Legal age will vary by state, so it is important to look up the legal age for your state of interest.
  • As for your preference, it needs to be someone you trust. Maybe start by asking a parent or close relative.
  • Needs to have a good credit score, and has to know all the financial responsibilities of a cosigner.
  • The cosigner will be required to have a consistent employer or a steady income. If a family member is not an option, consider a dependable, close friend.
  • Some private loan companies require that the cosigner have the same address as the applicant.

 

Cosigner Responsibilities

 

Make sure your cosigner fully understands what they are committing to and that you both discuss the responsibilities needed from a cosigner. Being a cosigner can be unpredictable. As a borrower, you may not be able to pay off a loan that you have taken on and your cosigner will be accountable for the remainder of the student loan payments. This could affect a cosigner and their future. Go over the cosigner paperwork and discuss all the options you have. You both will have equal responsibility throughout the life of the loan.

 

Cosigner responsibilities include payment on any late or missing payments as per the contract of the private loan. The cosigner’s credit report will show the student loan, therefore, any late payments will affect the cosigner’s credit score. A cosigner, by cosigning, is adding more credit to their credit history. Therefore, if the cosigner needs their own loan, they may find it difficult due to the additional credit added from the private loan.

 

A creditor may have different ways of collecting loan debt, but they can garnish wages depending on the state the loan is originated in. If the loan is not paid, you or the cosigner’s employer may be required to refuse a portion of your paycheck and send it to the creditor. In addition, a private loan may have clauses included in the document. Be aware that a clause may require the loan amount paid in full at the time of a cosigner’s death. Meaning if you ask someone to be a cosigner and they pass away the debt may have to be paid in full at that time. The same can go for the cosigner if the borrower passes away, the full debt balance could be expected at the time of the borrower’s death. Open communication between you and your cosigner is vital. Go over all clauses, liabilities, and possibilities to ensure you are both aware of the circumstances.

 

Factors to consider when selecting a cosigner

 

A cosigner needs to be someone who is completely able to pay off your loan. The private loan company will want to see that the cosigner has a steady income. A steady income means that they have reliable employment or a consistent form of payment. Without a steady income, the loan company will have no evidence that your cosigner has the funds to help pay off the loan.

 

Your cosigner will need to have a decently lengthy credit history. Along with the cosigner’s credit history, the lender will review their credit score. A credit score will illustrate to the loan company that the cosigner has borrowed money previously and was able to pay it back on time. A private loan company is always looking for a trustworthy candidate that will be capable of paying back their debt. While the loan company will decide if you and your cosigner are qualified, it is important that you have a dependable cosigner.

 

Cosigning will be a long term commitment and all clauses must be considered. Good health will be a factor when choosing a cosigner. Good health may seem like an odd qualification to have. If your cosigner dies, your loan could automatically be placed in default regardless of the payments you have made. Due to unfortunate circumstances, this could have a harmful effect on your credit score.

 

Whether it a relative or close friend, you and your cosigner must be on the same page. Once you have a loan you both will share the responsibility of getting it paid off. Talk about financial barriers together. If you are unsure you can pay off the loan, let your cosigner know ahead of time. This could help prevent any devastating effects on your credit scores in the future.

 

Benefits of using a Cosigner

 

While having a cosigner is a serious decision, it does include benefits. One of the biggest advantages to adding a cosigner is that it could help you to have a better interest rate. Adding a cosigner with a good credit history, and income, private loan companies may give you a lower interest rate. How can having a cosigner get you a lower interest rate? Since your cosigner should have an established credit history and income, it means that the loan is less risky for the lending institution. If the loan is more likely to be paid back based on previous borrower history, then the lending institution will provide a more attractive interest rate on the loan. Having a lower interest rate on your loan could mean thousands of dollars saved from debt repayment.

 

Secondly, having a cosigner could assist you with your own credit. Since a cosigner gives you a better chance at receiving the loan, you’re more likely to establish the credit to further build out your credit history. Assuming you’re able to make the monthly payments on your student loan, you will start to build a credit history. If you are paying on time, this will help you to improve credit for future needs and purchases for both you and cosigner. Without a cosigner, you may not be eligible for the loan and would not be able to get a jump start on your credit. Cosigning for a debt is not something that should be taken lightly by anyone. This could be the right answer for you or it could be the wrong answer. It’s important to review all your options as a borrower and discuss the liabilities and responsibilities of cosigning with your cosigner.

 

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