As many college students go through the rigors and necessary steps to finish their educations, once they’re done and successfully graduated, they know it’s time to start their own, independent lives. With school out of the way, jobs on the horizon and a bright future ahead many will be seeking to purchase their own homes – if not right away, sometime down the line. Going with the assumption that students will in fact buy a home within a 5 year span of graduating, they’re probably also looking to satisfy their student loan balances within that time frame. Here is where opportunity lies.
If such a situation exists for you, where student loans need to be paid and you now own a home, there is a way in which you can use your new home to pay off your student loans. How, you might ask? Well, it’s simply a matter of using a home equity loan to pay off your student loans, and quite quickly too.
Shortening Student Loan Payoff Through A Home Equity Loan
It’s no surprise that most students coming out of college feel that paying off their student loans will be a long haul. Yet, to your delight, as many other students’, there is a quicker solution to rid your self of student debt – through managing your debt responsibly and considering using a home equity loan. Considering here is mentioned merely because using a home equity loan to pay off your student loans is a two-sided financial action, having both ups and downs, defined pros and cons.
Take Into Mind Home Equity Loan Perks
When looked at and reviewed initially, it would seem that consolidating your student loans into a home equity loan would be a wise decision, one with little to think or worry about. This is so due to how home equity loans work. Since these types of loans essentially use your newly owned property as collateral, banks are able to offer much lower rates than the majority of what private student loans would. This is a saving grace, in more ways than one. Financially, you’ll save literally thousands of dollars (via long-term interest payments), not to mention benefiting from added tax perks. And better still, in terms of lowering your total expenditures, home equity loans are tax-deductible.
But, Also, Consider The Pitfalls of Using A Home Equity Loan
It’s clear that utilizing a home equity loan to pay off student loan debt is beneficial, yet it is still a bold and weighted move. Know that using a home equity loan isn’t 100 percent without caution. Firstly, it’s paramount to mention again that your house is used as collateral, which could be to your detriment, especially if rough times unexpectedly pop up, which could cause you to have to default on your mortgage. This could cause you to lose your home, which would be an awful thing to deal with.
And also, factor in that you will lose the deduction that comes with student loan interest, despite gaining a tax deduction for the paid interest on your home equity loan. The ideal thing to do here is to calculate, by crunching numbers, which loan option would best suit you in the long run. Make sure that you understand your options, as well as the ups and downs of home equity loan use to pay off your student loan balances.
By: E.S. Cromwell
Posts Tagged Ups
If you are thinking about starting your own business, your mind is undoubtedly full of questions. One of the most important questions will be: How am I going to raise the capital needed to get started?
Unless you’re independently wealthy, your financial support will come from outside sources. This financial support can be either from a loan, from banks or family and friends, or an investment resulting from the sale of stock in the new business.
Most entrepreneurs finance the early start-up stage of their business with personal savings. Service and Internet-based businesses, particularly, don’t require much capital and are often started with just the personal savings of the president and spouse. Personal borrowing from a bank is another possibility. Of course, this loan will have to be secured with a personal guarantee.
Other sources of financing are family, friends, and close business associates who are brought in as investors. You offer them the opportunity to buy a share of your company. With all investors, you should have formal, legal investment agreement to prevent disputes in the future.
There are many federal, state and local financial programs intended to encourage people to launch new businesses. The best place to start is to either contact or go to the web site of the U.S. Small Business Administration and get a listing of their programs for small start-up businesses. You’ll be able to get a description of each program and resources for each individual state.
Venture investors, whether individuals or venture capital funds, make their money by investing in start-ups. They usually have a lot of money available, but they are also very selective. There are three types of venture investors:
1. Individual venture investors, also known as “angels,” are wealthy individuals looking to invest personal money in new ventures. One of the advantages of turning to individuals is that they often decide quickly whether or not they are interested, without the bureaucracy or extensive investigation of more formal investment groups. On the downside, locating enough interested individual investors to finance your start-up can be difficult.
If you decide to approach individual investors, work with a knowledgeable lawyer completely familiar with the government regulations involved in this type of investment.
2. Institutional venture funds are usually limited partnerships in which the bulk of the money is supplied by passive limited partners, such as insurance companies or corporate retirement funds. The portfolio is managed by a general partner or group of general partners. These partners or groups have lots of money and because they are in the business of financing start-ups, they can be a valuable source of experience and expertise.
However, the process is very slow as the funds carefully examine all factors and risks. In addition, venture capital funds drive tough financial deals on issues such as determining what they will pay for your company stock. When you approach a venture fund, don’t appear desperate for money, because you may pay dearly for it.
3. Corporate venture investors are divisions of large corporations usually looking to invest in start-up companies in related business areas. One major advantage of raising money from corporate investors is that in addition to providing money, they can provide both technical and management expertise, and because they have goals other then pure financial gain, they may not drive as hard a deal as venture funds.
The major drawback: Corporate funds often want to eventually gain control of the company in which they invest, a condition you find unacceptable.
Your company will probably need some kind of track record before you should think about selling stock to the public. However, many start-ups have gone public successfully very early in their corporate lives.
Raising outside financial support for your company is a sales person’s job. Forget about being president of the company, an innovative design engineer, or whatever previous positions you held. You are now a salesperson, and what you are selling is your business, specifically, your idea for a product or service, your management team and your knowledge of the market.
Selling is a process with well established techniques. There are many books, audio programs and educational seminars that explain these techniques, from developing leads to planning and delivering your sales pitch to answering objections and closing the deal.
Read these books, listen to the audio programs, take the seminars and learn these skills. Otherwise, you won’t stand much of a chance in getting the money you need to start a business.
Copyright©2007 by Joe Love and JLM & Associates, Inc. All rights reserved worldwide.
By: Joe Love