Direct Consolidation Loans - From Standard Plan To Income Contingent Repayment Plan

Prepare for your studies, the most common and convenient way to get a loan is student loan. However, upon your graduate, its time to start paying it off and you must always be prepared for it. As a student, one of the best options is getting a Direct Consolidation Loan. This option not only benefits students but also available to working adults. The following paragraphs will review the different types of payment plans and benefits for Direct Consolidation Loan.

Simplification is the obvious advantage for consolidation loans for those people who have several different student loans. Convenience is the key pointer to people with many different student loans. By uniting them under a single Direct Consolidation Loan, repaying the loan becomes more easily manageable, because you only have to make one payment instead of several different ones. You will have four different types of payment plans to choose, two of which will take into account your income.

You dont require to have graduated to take advantage of Direct Consolidation Loan. Under such loan, it is common to have granted a lower interest rate than those people who refinance after they have graduated. Maybe up to 0.6% lower.

Standard Repayment Plan

Borrowers who choose the Standard Repayment Plan must adhere to the requirement - at least pay a minimum of $50 per month. The maximum lifespan is ten years. Those people with higher income may choose the Standard Repayment Plan because borrowers pay the least interest compared to all the four plans with only ten years term. Lets take an example if a borrower loan $15,000 for his studies with 8.25% interest rate for ten years. The repayment is $184 for 120 months, that is equal to a total of $22,077. That means $7,077 of interest he has to pay for the whole term, and is considered the lowest interest as compared to all the other plans with longer term.

Extended Repayment Plan

The Extended Repayment Plan is slightly flexible than the Standard Plan. With the same minimum payment of at least $50 per month, the repayment can be extended between 12 to 30 years. The period varies according to the total amount of the debt. This plan benefits borrowers for larger amount of debts with lower fixed payment and up to 30 years of repayment term. Lets take the same example of $15,000 loan with 8.25% interest rate over 15 years of $146 monthly payment. That will be equal to $26,196. Sure, under the Extended Repayment Plan the interest borrowers have to pay will be higher than the Standard Plan.

Graduate Repayment Plan

The Graduate Repayment Plan, with a similar lifetime as that of the Extended Repayment Plan, the payments are low during the first period and they increase over time, usually every two years. This plan fits in between Standard and Extended Repayment Plan with lower payments initially and will adjust higher every two years to allow borrowers sufficient time to build their income steadily.

Income Contingent Repayment Plan

The calculation under the Income Contingent Repayment Plan includes borrowers annual income and family size. Monthly payments are adjusted annually with a maximum lifetime of twenty five years. This plan provides the flexibility to make payments according to borrowers annual income and thus enable them to avoid any financial hardship.

Its up to the borrowers decision to choose the type of plans, I hope the above explanation will provide a better understanding on direct debt consolidation loan.

More Bank for Your Buck

What do you think of when you hear the word bank? The thought probably has nothing to do with anything enjoyable. If you were to ask any business professional the first word that comes to mind, it would most likely be a provider of debt or money. When I hear the word bank, I think of vendor. I wish I could see the jaws drop on the people reading this excerpt. A vendor? What is this guy talking about? Before you drop my idea all together let me explain what I mean when I say: Your bank could probably become your best vendor.

Every business owner deals with vendors on a daily basis. The better vendors in the industry will not only provide goods or services to your business, but will also provide you with technical assistance or expertise in their field. This is how you should view your "money vendor." Which bank provides you with the best service and technical support around? Here are some thoughts when choosing your next money vendor.

Size. There are huge banks, big banks, regional banks and local banks. Most of your local banks are focused on the local community and are limited to the amount of money they can lend to any one customer. Some have some very seasoned lenders who can be very helpful in providing technical advise. The larger banks have the traditional type of lenders, but can also have specialists for specific industries. If you need $25 million or more in financing, you will need a regional or larger bank. Most large banks are also training grounds for younger lenders, which means it may take some work to find a more seasoned technical assistant.

Rates. Although you might think that all banks are created equal, they are not. You might think that the big bank with huge deposits can give you the best rate, which is sometimes "true." You might think that the smaller bank with smaller deposits would charge a higher rate, which is sometimes "not true." Rates are based mostly on: 1) the historic financial performance of your company: free cash flow, debt to worth ratio, debt service ability, current ratio, collateral value and the advance rates on current assets (accounts receivable and inventory) and 2) how aggressive the bank is looking for loans. The biggest earning asset the bank has is its loans. So, if their loans are down, the bank can be more aggressive in funding new borrowers. This increases their outstanding loans so they can earn more money.

Loan Specialty. Many banks have developed a comfort or specialty for certain types of business loans. Some banks understand real estate very well and would rather not make an equipment or inventory loan. In those types of situations, if you need a piece of equipment or inventory financed and you have real estate that can be leveraged, you can probably get the loan you need. Some banks would rather do short term financing and use your accounts receivable as collateral. Others really specialize in consumer financing (cars, boats, home equity lines of credit, etc.), but they don't tell you that in their literature. It is much easier to obtain financing from a lender who understands your business, likes your collateral, and your proposed financing strategy, than one who disregards your needs to fit their portfolio requirements.

Relationship. Probably the most important factor in finding a good money vendor is finding a banking officer that is relationship orientated and technically competent. Most seasoned bankers have a wealth of experience and can give you valuable insight into your business, from a non-biased, financial point of view. Invite them out to your business, take them to lunch, and make them your friend. There are hundreds of banks and thousands of bankers. You can find one that has the expertise and interest in your business. It just might take a little work; but it is well worth it.

The Bottom Line. Focus on the relationship factor first and then work backwards. The work you put into picking your "money vendor" in the front end will pay you large dividends in the back end.