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Refinance

Another new year brings another set of resolutions — many of which involve making new financial goals. Whether you’re currently in school or have been in the workforce for a few years, it’s smart to make these changes now in order to set yourself up for future financial success.

But it’s one thing to make financial goals, and another thing to stick with them. Here’s a few tips to save more money and budget effectively to keep yourself on track throughout the year.

Create A Budget. Then Write It Down.

This is important. Many of us budget in our heads, but don’t take the time to write it down. Dig out your notebook. Then, follow these steps to set up an effective budget that helps you make responsible decisions with your funds.

  • Determine a timeline for your budget — will you track it by week, month, semester, or year?
  • Separate your expenses into categories like housing, transportation, and entertainment
  • Revisit the document on a regular basis to update and track payments

The way you set up your budget is up to you. The important thing is to get it written down.

Wants Versus Needs

Obviously, there are things you need to pay for. Tuition, fees, housing, and food can all add up. The line between “needs” and “wants” can be blurry, so it’s important to clearly define them in your budget.

For example, if you’re paying for a school meal plan, going out with friends is a “want,” even though you need to eat. That doesn’t mean you have to give up eating out or spending money on things you want — in fact, it’s often important to do so!

By determining which expenses are “wants” and which are “needs,” you’ll be able to spend your money responsibly without going overboard.

Financial Goals Quick Tip: Consider giving yourself a set allowance to spend on your “wants.” If you’re saving up for something big, determine which “wants” you’re willing to spend less on each week.

Credit or Debit?

When it comes to the debate between credit cards and debit cards, there’s really no right or wrong answer. In many cases, it’s smart to use both. However, it’s especially important to use your credit card responsibly.

  • Use your credit card for one small charge each month — otherwise, keep it for emergencies only
  • If an emergency does happen, stop your monthly charges and instead use that money to pay off your credit card
  • When using your debit card, keep an eye on your checking account to make sure you aren’t spending more than you have

By handling your spending this way, you can build your credit score without relying on credit card debt to fund all of your wants. Your debit card gives you the convenience and security of not having to carry cash everywhere.

Loans and Financial Aid

Chances are you’ve had to borrow some money to pay for at least a portion of your education. If you’ve taken out a variety of different loans, it can be difficult to keep track of what you really owe.

When you’re considering taking out a loan, it’s helpful to research repayment options to find the loan that is right for you. If you find your payments are too high, you may consider refinancing all your loans into one loan with a potentially lower interest rate.

Setting up your financial goals doesn’t mean sacrificing experiences like going to the movies or eating out with friends. By budgeting and defining your wants and needs, you make smart choices that count.

Want to make another smart financial decision? See how U-fi From Nelnet can help with smart choices about student loans.

Thinking about applying for a new private student loan, or refinancing your existing federal and private student loans? Expect the lender to check your credit history and credit score. They do this to ensure you are not a credit risk. You can proactively take steps to improve your credit health and raise your credit score. Start with understanding what’s in your credit report, and what student loan lenders are looking for.

What is Credit?

Have you ever taken out a student loan or credit card? If so, you entered into an agreement to receive funds that must be paid back later. Unlike credit cards, student loans are repaid in installments over a set number of payments. This term is usually 5 to 25 years.

When you take out a student loan, most lenders or servicers notify at least one of the three major credit reporting agencies. These are Equifax, Experian, or TransUnion. They do this so they can include the new account on your credit report as a trade line. Each trade line contains detailed information. This information includes account name and number, loan type, date opened, original and current balance, payment status, and monthly payment.

The lender or servicer notifies the credit agencies of all loan activity. This activity includes payment date, amount of payment applied to principal and interest, and timeliness of payments. The credit agency records this information, which makes up part of your credit history.

Understanding Your Credit Report

While each credit reporting agency’s reporting format may be slightly different, they essentially include the same information:

  • Personal Information, such as your name, address (current and previous), Social Security number, date of birth, and other information that identifies who you are.
  • Credit History, including your open and closed accounts, original loan amounts, current balances, and payment history.
  • Public Records, such as delinquent accounts, liens, and bankruptcies. Public records can remain on your credit report for many years, which will affect your ability to obtain future credit.
  • Credit Inquiries, which are placed on your credit report when you request credit. Credit inquiries remain on your file for two years.

Tip: Federal law entitles you to a free copy of your credit report each year from all three credit reporting agencies. Take advantage of this and check your report from each credit bureau annually. This ensures your personal information is accurate and up to date. To get a free credit report, visit www.AnnualCreditReport.com or call 877-FACTACT. If something on your report looks inaccurate, be sure to contact the credit agency immediately to have it addressed. Unfortunately, the credit reports will not include your credit score.

What Student Loan Lenders Look For When Checking Your Credit

When making a credit decision, private student loan lenders check your credit report and credit score. They do this to determine whether you are an acceptable risk, and what interest rate they should charge you. If you have a cosigner, lender checks their credit report and credit score too.  Most lenders, like U-fi From Nelnet, will want to see an adequate credit history, a track record of making on-time payments, how much debt you have outstanding, and a good credit score. Lenders also ask how much income you have to determine whether you, or your cosigner, have enough monthly income to make monthly payments.

To increase your chances of being approved and receiving a low interest rate for a new student loan or a student refinance loan, you and/or your cosigner will want to have at least two open trade lines, be no more than 30 days past due on more than one account, and have no public records for the past five years. Most lenders will also want to see a good credit score. While each lender is different, if you have a credit score above 700, you will generally be considered a good credit risk.

Tip: When shopping for a private student loan or student refinance loan you should complete all your applications within a short window (e.g. 30 days), since multiple credit inquiries within a brief time period will have little impact on your credit score.

How Does Your Credit History Affect Your Credit Score?

Your credit score is a number that summarizes your credit risk at any moment in time. While there are several types of credit scores, 90% of lending decisions use a FICO score. Fair Isaac Corporation creates the FICO score. FICO scores range from a low of 300 to a high of 850, with higher being better. FICO scores are made up of the following:

  • 35%: Payment History – have you made your past payments on time?
  • 30%: Amount Owed – how much debt do you owe and how much of your available credit has been used?
  • 15%: Length of Credit History – how long have you been using credit?
  • 10%: New Credit – how much of your debt has been opened recently?
  • 10%: Types of Credit Used – do you have different types of credit such as credit cards, installment loans, and mortgages?

Tip: FICO scores can change from month to month due to several factors. Not having too much debt, and making full payments on time, over a long period gives lenders more confidence you will repay them. That increases the likelihood they will extend you credit at a lower interest rate.

Understanding what’s on your credit report and how it impacts your ability to get a good credit rate is extremely important. If you notice something incorrect on your credit report, call the credit agency immediately. Work with them to correct any problems. A better credit history and higher credit score means a better shot at approval and a low interest rate. Your credit could save you a lot of money on your student loans. It can also ensure additional credit is there for you when you need it most.

Undergraduate students graduate with an average of $30,000 in student loan debt. This amount can feel overwhelming. However, there are several tips for saving money on student loans. You can do it while you are in school and after you graduate.

Saving Money on Student Loans Step 1: Only Borrow What You Need

The first step is to only borrow what you need to cover your college costs. Many students over-borrow and end up with more student loan debt than they are able to pay back after graduation. Grants and scholarships usually don’t have to be paid back as long as you continue to meet their requirements. However, these forms of financial aid generally won’t cover all of your college costs. Looking at your federal loan options is your next step. Federal loans will have to be paid back with interest. However, they usually offer borrowers lower interest rates and more flexible terms. Make sure you take advantage of these options before considering a private student loan. Private student loans are a great option when you’ve exhausted all federal aid options and still have college expenses. As with any loan, make sure you understand the terms and conditions.

Saving Money on Student Loans Step 2: Make In-School Payments

The second way to save money on your student loans is to make payments while in school. Most loans will give you a deferred payment option. This means you don’t have to make any payments on your student loans while you’re in school or during your grace period. While it sounds like a good option, interest accrues on your loans during this time. That could mean a larger bill at repayment. If you budget to make full principal and interest payments while still in school, you’ll save the most money over the life of the loan, but that isn’t always feasible for everyone. Another great way to save money is to make interest-only payments while in school. This monthly payment will be much less than a full principal and interest payment, but will set you up for success when you get to repayment.

Entering Repayment

Once you graduate your loans will go into repayment following your grace period. That means you will start making payments toward your full principal and interest payments until the loans are paid off. Federal loans have several repayment options to fit your budget, but keep in mind the lower your payment and the longer your loan term the more interest you will pay over the life of the loan. Make sure you are aware of and take advantage of any borrower benefits your loan servicer offers, such as a lowered interest rate for auto-debit payments.

Refinancing or consolidating your student loans may also be a good option for you.

These are a few of the main ways to save yourself money on your student loans while you’re in school and after you graduate. Knowing your options and paying what you can along the way will set you up for a successful future, free from student loans.