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China new bank loans hit record in Jan as cenbank eases policy

China new bank loans hit record in Jan as cenbank eases policy


  • Jan new loans 3.98 trln yuan vs f’cast 3.69 trln yuan
  • Jan M2 money supply +9.8% y/y, vs f’cast of +9.2%
  • Jan TSF 6.17 trln yuan, vs f’cast 5.46 trln yuan
  • C.bank eases policy to support slowing economy

BEIJING, Feb 10 (Reuters) – New bank lending in China more than tripled in January from the previous month, beating forecasts and hitting a record high, as the central bank seeks to shore up slowing growth in the world’s second-largest economy.

Chinese banks extended 3.98 trillion yuan ($626 billion) in new yuan loans in January, up from 1.13 trillion yuan in December, according to data released by the People’s Bank of China on Thursday.

Chinese lenders tend to front-load loans at the beginning of the year to get higher-quality customers and win market share.

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Analysts polled by Reuters had predicted new yuan loans would soar to 3.69 trillion yuan in January. The new loans were higher than 3.58 trillion yuan a year earlier.

“The market worries that policy stimulus this round may not be as strong and effective as in the past few rounds. I think this set of data helps to address part of the concern but not the full problem,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

“I expect further policy easing measures in coming months. There may be more RRR (reserve requirement ratio) and rate cuts, and financing for property developers is also critical to watch.”

China’s economy cooled over the course of last year and faces multiple headwinds as a property downturn hurts investment and the country’s efforts to contain local cases of the highly contagious Omicron variant weigh on consumption.

The central bank has cut reserve requirement ratios for banks, as well as the borrowing costs of its medium-term lending facility (MLF) and the loan prime rate – the benchmark lending rate – and more easing steps are expected. read more

Authorities have been marginally easing financing curbs for property developers and speeding up mortgage issuance for home buyers.

Household loans, mostly mortgages, rose 843 billion yuan in January from 371.6 billion yuan in December, while corporate loans surged to 3.36 trillion yuan from 662 billion yuan.

MORE EASING STEPS EXPECTED

Broad M2 money supply in January grew 9.8% from a year earlier – the strongest expansion since February 2021, central bank data showed, above estimates of 9.2% forecast in the Reuters poll. It rose 9.0% in December.

Outstanding yuan loan grew 11.5% from a year earlier compared with 11.6% growth in December. Analysts had expected 11.6% growth.

Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, quickened to a six-month high of 10.5% in January, up from 10.3% in December.

“Credit growth will probably continue to accelerate in the coming months amid declines in borrowing costs, a looser fiscal stance and easing regulatory constraints on mortgage lending,” Julian Evans-Pritchard at Capital Economics said in a note.

“We think this policy easing will continue in the near-term and expect a second cut to the PBOC’S MLF rate next week.”

TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales.

In January, TSF jumped to 6.17 trillion yuan from 2.37 trillion yuan in December. Analysts polled by Reuters had expected January TSF of 5.46 trillion yuan.

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Reporting by Judy Hua and Kevin Yao; Editing by Toby Chopra

Our Standards: The Thomson Reuters Trust Principles.

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Breaking Costs & SOFR Loans: Breaking-up is Still Expensive | Moore & Van Allen PLC

 Breaking Costs & SOFR Loans: Breaking-up is Still Expensive |  Moore & Van Allen PLC


[co-author: Ashley Longman]

It may not be the next Taylor Swift song, but a prepayment changes the Lender-Borrower relationship. In a swap, we all know there are consequences. Rather than a “breaking cost”, the swap market just calls it an early termination payment. In loans, traditionally, there was less time/energy spent to negotiate the provisions requiring the borrower to indemnify a lender for breakage costs. Today, however, it is a hot topic. Specifically, in the context of SOFR-loan prepayments where the concept of “Breakage Costs” is a nebulous/unclear concept, leaving some market participants to ask, in a post-LIBOR world, “Are there still ‘Breakage Costs’ for loans simply due to prepayment?

Hot Take: Term SOFR has breaking costs for the same reason LIBOR does. The same is true for Daily Simple SOFR, though maybe the costs are less when compared to Term SOFR. As further discussed below, “breaking costs” describe the bank’s costs for managing expected cash-flow between SOFR-assets and SOFR-liabilities (largely funded by the SOFR-assets). Breakage costs are not opportunity costs. The below broadly describes some aspects of bank risk management, but the core concept is there, and that core concept justifies a breaking cost.

LIBOR-World: Breakage Costs = LIBOR Deposits

During the LIBOR-era, it was not uncommon to see a loan include a concept for the bank to be indemnified for “breakage costs” (even if there was no prepayment penalty). If the same loan provided an indication as to the calculation of any breakage costs, it was often based on the concept of what the bank could have otherwise earned on a “LIBOR deposit” or otherwise put their funds to work. That provision may be the genesis for this confusion. It clearly ties the breaking costs to a concept of opportunity costs – ie, the costs reflecting what the bank could have otherwise earned on purchasing a LIBOR asset at the beginning of the interest period.

SOFR-World: Breakage Costs = ???

Now, parties see a prepayment of a SOFR-loan and struggle to justify breaking costs because, to paraphrase, “If the bank needs a SOFR return for the remainder of the interest period, then it can just participate in the over-night repo market”. First, let’s put aside whether it is even possible for a bank to be prepaid on Day T and have the same funds available for the repo market that night. The thinking is not wrong, however if prepaying Term SOFR, the chances that Term SOFR perfectly equals Actual SOFR are close to zero. The issue is not around what the bank could have otherwise earned. The issue is whether the bank will have met expectations for its cash outflows (eg, SOFR-liabilities) based on receiving Term SOFR from Borrower. If the bank does not receive Term SOFR to cover its SOFR-liabilities, the bank may need to find another SOFR-asset and purchase it (or remove a SOFR-liability) as part of its broader management of the bank’s entire portfolio of risk. The bank will not just bet on (or expect) that the overnight repo market will be close enough to Term SOFR.

Background: 2020 Banking & Risk Management

Some parties may view the business of the bank as a business of making loans and then using the income from that loan to fund other loans or pay normal expenses. This is the ole “Bailey Building and Loan” model, and George Baily is everyone’s banker. It’s your 1920s/30s bank (and the best Christmas movie, sorry Elf).

In today’s business of banking: The goal is to minimize the time that a bank has static money on its books. If cash is flowing out of the bank, then the bank is generating income from (i) fees and/or (ii) spreads. Here, “spreads” really means any concept where the bank is asking a customer to pay $XYZ for a product, and that value is greater than the costs to the bank to provide that product.

What is also important to realize here: Outward cash flows are not always a one-time event (eg, a loan being made) – ie, a bank could hold a liability that requires many recurring payments. Example: a swap. The below diagram shows how banks will think about swaps and funding the bank’s obligations on that swap. This is not “unique” or “Ed, sure…in some cases, but not all”. A big nuance missing here is sometimes the “Hedging Asset” could be one-off (as described below by using a swap) or the bank could be engaging in portfolio hedging (so, not 1-for-1). Additionally, rather than a “1.0% per month” cost, the cost could be a single bullet payment to purchase SOFR-paying notes/securities.

Either way, the bank does not commit to a SOFR-liability (here, a commitment to pay SOFR on a swap) without some asset that should produce the SOFR return. A large function of treasury/risk management teams is to manage this very risk. The bank does not want to warehouse the risk of “Well, not sure what SOFR will do tomorrow, but I bet we can pay it.” To this end, the bank wants a Term SOFR-asset to pay for any Term SOFR-liability.

Breakage Costs = Risk Management Costs

Banks try to keep cash flowing out of the bank in-sync with cash coming in from (i) the Federal Reserve, (ii) purchased assets or (iii) bank-produced assets. The problem with (i): you have to pay back that loan. The problem with (ii): those generally cost more than (iii). This makes (iii) a pretty efficient way to fund bank activities.

This is why your SOFR-loans still need a provision regarding breakage costs. If the borrower prepays, the bank will incur some expense because it has to adjust its expectation as to SOFR receipts from that loan. If a Term SOFR-loan is prepaid on Monday, then on Tuesday the bank needs an asset to produce that Term SOFR expectation. Good risk management here is not “Eh, just do overnight rest” because the Term SOFR rate on January 1 is not impacted by any sharp drop in SOFR rates during that interest period. So: For the bank to pay Term SOFR it needs a Term SOFR asset. If it cannot find a perfect match, then not only are the costs to purchase an imperfect asset “Breakage Costs”, but any delta that costs the bank money should also be included in “Breakage Costs”.

To be fair, the costs may be low on a loan-by-loan basis, but a bank will want to consider this on a portfolio basis. For a Daily Simple SOFR-loan, maybe the costs are even smaller but odds are still good that a bank does not have funds in the door on Day T, and the same funds are used in the repo market that night (so, there will still be a cost to the bank to plug the hole during the time that the pre-paid funds cannot otherwise be put to work).

This is not a prepayment fee/penalty. It is simply the bank requiring that the borrower make the bank whole for incurring new costs to manage a new risk created by the prepayment.

There may be other costs as well, but the above is a cost that makes sense to me and provides at least one good reason why (i) Lenders should keep the “Breakage Costs” provisions and (ii) a borrower trying to negotiate it out , should at least appreciate the bank is not being unreasonable. Ultimately, it’s up for negotiation (like anything else), but maybe this context can move the negotiation away from only focusing on whether or not breaking costs even exist.

If Breakage Costs exists, how much $$$$ is the Breakage Cost?

Good question. Some LIBOR loans never went into this detail, some did and based it on a LIBOR deposit. A possible answer would be to use the USD SOFR ICE Swap Rate (HERE), whenever ICE starts to publish it. That rate, on the date of prepayment, applied to the prepaid amount for the remainder of the interest period or fiscal quarter, on an ACT/360 basis should be a fair estimate of the cost to the bank. With that said, an argument can be made that a premium could be added because there are transaction costs beyond what may be captured by the USD SOFR ICE Swap Rate. To be clear, there are other possible metrics too (eg, just go with Term SOFR or Term SOFR+Adjustment for the remainder of the interest period). Maybe that is where parties should focus energy today. Not on the existence of breaking costs, but instead on “They exist, but how expensive is breaking up with our new partner, SOFR.”



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Elon Musk will be most indebted CEO in America if Twitter deal closes

Elon Musk will be most indebted CEO in America if Twitter deal closes


Tesla head Elon Musk talks to the press as he arrives to have a look at the construction site of the new Tesla Gigafactory near Berlin on September 03, 2020 near Gruenheide, Germany.

Maja Hitij | Getty Images

The world’s richest person could soon add another title to his name – America’s most leveraged CEO.

Two-thirds of Elon Musk’s financing for the $44 billion deal to take Twitter private will have to come out of his own pocket. That pocket is deep. He has a net worth of about $250 billion.

Yet because his wealth is tied up in Tesla stock, along with equity in his SpaceX and The Boring Co., Musk will have to sell millions of his shares and pledge millions more to raise the necessary cash.

According to his SEC filings, Musk’s financing plan includes $13 billion in bank loans and $21 billion in cash, likely from selling Tesla shares. It also includes a $12.5 billion margin loan, using his Tesla stock as collateral. Because banks require more of a cushion for high-beta stocks like Tesla, Musk will need to pledge about $65 billion in Tesla shares, or about a quarter of his current total, for the loan, according to the documents.

Even before the Twitter bid, Musk had pledged 88 million shares of the electric auto maker for margin loans, although it’s unclear how much cash he’s already borrowed from the facility.

According to research firm Audit Analytics, Musk has more than $90 billion of shares pledged for loans. The total makes Musk the largest stock-debtor in dollar terms among executives and directors, far surpassing second-ranked Larry Ellison, Oracle’s chairman and chief technology officer, with $24 billion, according to ISS Corporate Solutions, the Rockville, Maryland-based provider of ESG data and analytics.

Musk’s stock debt is outsized relative to the entire stock market. His shares pledged before the Twitter deal account for more than a third of the $240 billion of all shares pledged at all companies listed on the NYSE and Nasdaq, according to Audit Analytics. With the Twitter borrowing, that debt could soar even higher.

Of course, Musk has plenty of cushion, especially since he continues to receive new stock options as part of his 2018 compensation plan. His 170 million in fully owned Tesla shares, combined with 73 million in options, give him a potential stake in Tesla of 23%, at a value of over $214 billion. The rest of his net worth comes from his more than 50% stake in SpaceX and his other ventures.

He received another 25 million options as part of the plan this month as Tesla continued to meet its performance targets. While Musk can’t sell the newly received options for five years, he can borrow against them.

Yet Musk’s 11-figure share loans represent an entirely new level of CEO leverage and risk. The risks were highlighted this week as Tesla’s share price slid 12% on Tuesday, chopping more than $20 billion from Musk’s net worth. Shares of Tesla were down less than 1% on Thursday afternoon.

Musk’s bet also come as other companies are sharply cutting back or restricting share borrowing by executives. More than two-thirds of S&P 500 companies now have strict anti-pledging policies, prohibiting all executives and directors from pledging company shares for loans, according to data from ISS Corporate Solutions. Most other companies have anti-pledging policies but grant exceptions or waivers, like Oracle. Only 3% of companies in the S&P are similar to Tesla and allow share pledging by executives, according to ISS.

Corporate concerns about excess stock leverage follow several high-profile blowups in which executives had to dump shares after margin calls from their lenders. Green Mountain Coffee Roasters in 2012 demoted its founder and chairman, Robert Stiller, and its lead director, William Davis, after the two men were forced to sell to meet margin calls. In 2015, Valeant CEO Michael Pearson was forced to sell shares held by Goldman Sachs as collateral when it called his $100 million loan.

Jun Frank, managing director at ICS Advisory, ISS Corporate Solutions, said companies are now more aware of the risks of executive pledging, and face greater pressure from investors to limit executive borrowing.

“Pledging of shares by executives is considered a significant corporate governance risk,” Frank said. “If an executive with significant pledged ownership position fails to meet the margin call, it could lead to sales of those shares, which can trigger a sharp share drop in stock price.”

In its SEC filings, Tesla states that allowing executives and directors to borrow against their shares is key to the company’s compensation structure.

“The ability of our directors and executive officers to pledge Tesla stock for personal loans and investments is inherently related to their compensation due to our use of equity awards and promotion of long-termism and an ownership culture,” Tesla said in its filings. “Moreover, providing these individuals flexibility in financial planning without having to rely on the sale of shares aligns their interests with those of our stockholders.”

The exact amount that Musk has borrowed against his shares remains a mystery. Tesla’s SEC filings show his pledge of 88 million shares, but not how much cash he’s actually borrowed against them. If he pledged the shares in 2020 when Tesla stock was trading at $90, he would have been able to borrow about $2 billion at the time. Today, the borrowing power of those shares has increased tenfold, so he could have room to borrow an additional $20 billion or more against the 88 million shares already pledged. In that case, only about a third of his Tesla stake would be pledged after the Twitter deal.

Yet if he’s increased his borrowing as Tesla shares have risen in value, he may have to pledge additional shares. Analysts say that if Musk has maxed out his borrowing on the 88 million shares (which is highly unlikely) and he has to pledge an additional 60 million shares to fund the Twitter deal, more than 80% of his Tesla fully owned shares would be pledged as collateral.

That would leave him with about $25 billion in Tesla shares unpledged. If he also has to sell $21 billion of Tesla shares to pay the cash portion of the Twitter deal, as well as the accompanying capital gains taxes, virtually all of his remaining fully owned stock would be pledged.

According to SEC filings, Musk sold about $8.4 billion worth of Tesla shares this week. He tweeted Thursday, “No Further TSLA sales planned after today.” Yet his plans for raising the rest of the $21 billion in cash needed for the deal remain unclear.

Either way, Musk will be putting a large share of his Tesla wealth at risk, which could make for a bumpy ride ahead for Tesla shareholders.

Borrowing against shares, Frank said, “exposes shareholders to significant stock price risk due to an executive’s personal financing decisions.”

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Personal loan rates edge up but remain lower than same time last year

Personal loan rates tick up: 3-year loans still lower than same time last year


Our goal here at Credible Operations, Inc., NMLS Number 1681276, referred to as “Credible” below, is to give you the tools and confidence you need to improve your finances. Although we do promote products from our partner lenders who compensate us for our services, all opinions are our own.

The latest trends in interest rates for personal loans from the Credible marketplace, updated weekly. (iStock)

Borrowers with good credit seeking personal loans during the past seven days prequalified for rates that were slightly higher for 3-year fixed rates and 5-year fixed rates compared to the previous seven days’ fixed-rate loans.

For borrowers with credit scores of 720 or higher who used the Credible marketplace to select a lender between Feb. 21 and Feb. 27:

  • Rates on 3-year fixed-rate loans averaged 10.76%, up from 10.37% the seven days before and down from 11.36% a year ago.
  • Rates on 5-year fixed-rate loans averaged 13.11%, up from 12.64% the previous seven days and down from 14.00% a year ago.

Personal loans have become a popular way to consolidate and pay off credit card debt and other loans. They can also be used to cover unexpected expenses like medical bills, take care of a major purchase or fund home improvement projects.

Rates for 3-year and 5-year fixed personal loans ticked up over the past seven days. However, rates for both terms rose by less than half a percentage point, and are significantly lower than they were this time last year. Borrowers can still take advantage of savings with either a 3-year or 5-year personal loan right now.

Whether a personal loan is right for you often depends on multiple factors, including what rate you can qualify for. Comparing multiple lenders and their rates could help ensure you get the best possible personal loan for your needs.

It’s always a good idea to comparison shop on sites like Credible to understand how much you qualify for and choose the best option for you.

Here are the latest trends in personal loan interest rates from the Credible marketplace, updated monthly.

Personal loan weekly rates trends

The chart above shows average prequalified rates for borrowers with credit scores of 720 or higher who used the Credible marketplace to select a lender.

For the month of January 2022:

  • Rates on 3-year personal loans averaged 11.09%, down from 11.29% in December.
  • Rates on 5-year personal loans averaged 13.40%, down from 14.12% in December.

Rates on personal loans vary considerably by credit score and loan term. If you’re curious about what kind of personal loan rates you may qualify for, you can use an online tool like Credible to compare options from different private lenders. Checking your rates won’t affect your credit score.

All Credible marketplace lenders offer fixed-rate loans at competitive rates. Because lenders use different methods to evaluate borrowers, it’s a good idea to request personal loan rates from multiple lenders so you can compare your options.

Current personal loan rates by credit score

In January, the average prequalified rate selected by borrowers was:

  • 8.89% for borrowers with credit scores of 780 or above choosing a 3-year loan
  • 29.32% for borrowers with credit scores below 600 choosing a 5-year loan

Depending on factors such as your credit score, which type of personal loan you’re seeking and the loan repayment term, the interest rate can differ.

As shown in the chart above, a good credit score can mean a lower interest rate, and rates tend to be higher on loans with fixed interest rates and longer repayment terms.

How to get a lower interest rate

Many factors influence the interest rate a lender might offer you on a personal loan. But you can take some steps to boost your chances of getting a lower interest rate. Here are some tactics to try.

Increase credit score

Generally, people with higher credit scores qualify for lower interest rates. Steps that can help you improve your credit score over time include:

  • Pay bills on time. Payment history is the most important factor in your credit score. Pay all your bills on time for the amount due.
  • Check your credit report. Look at your credit report to ensure there are no errors on it. If you find errors, dispute them with the credit bureau.
  • Lower your credit utilization ratio. Paying down credit card debt can improve this important credit scoring factor.
  • Avoid opening new credit accounts. Only apply for and open credit accounts you actually need. Too many hard inquiries on your credit report in a short amount of time could lower your credit score.

Choose a loan shorter term

Personal loan repayment terms can vary from one to several years. Generally, terms shorter come with lower interest rates since the lender’s money is at risk for a shorter period of time.

If your financial situation allows, applying for a shorter term could help you score a lower interest rate. Keep in mind the shorter term doesn’t just benefit the lender — by choosing a shorter repayment term, you’ll pay less interest over the life of the loan.

Get a co-sign

You may be familiar with the concept of a co-signer if you have student loans. If your credit isn’t good enough to qualify for the best personal loan interest rates, finding a co-signer with good credit could help you secure a lower interest rate.

Just remember, if you default on the loan, your co-signer will be on the hook to repay it. And co-signing for a loan could also affect their credit score.

Compare rates from different lenders

Before applying for a personal loan, it’s a good idea to shop around and compare offers from several different lenders to get the lowest rates. Online lenders typically offer the most competitive rates – and can be quicker to disburse your loan than a brick-and-mortar establishment.

But don’t worry, comparing rates and terms doesn’t have to be a time-consuming process.

Credible makes it easy. Just enter how much you want to borrow and you’ll be able to compare multiple lenders to choose the one that makes the most sense for you.

About Credible

Credible is a multi-lender marketplace that empowers consumers to discover financial products that are the best fit for their unique circumstances. Credible’s integrations with leading lenders and credit bureaus allow consumers to quickly compare accurate, personalized loan options ― without putting their personal information at risk or affecting their credit score. The Credible marketplace provides an unrivaled customer experience, as reflected by over 4,500 positive Trustpilot reviews and a TrustScore of 4.7/5.



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Payday loans create financial hardship for borrowers

Payday loans


LEXINGTON, Ky. — High-interest payday loans are easily accessible and widely available. But for many residents, particularly in Appalachia and other rural parts of Kentucky and the country, those loans may contribute heavily to a cycle of poverty.


What You Need To Know

  • About 200 million Americans live in states that allow payday lending without heavy restrictions
  • The average payday loan in Kentucky is $348 with over 400% interest
  • Nearly 8% of Kentuckians are “unbanked,” which is higher than the national average of 6%
  • Texas has the highest payday loan rates in the US at 664%, over 40 times the average credit card interest rate of 16.12%

Hannah, a single mother of three children in eastern Kentucky who spoke on the promise of anonymity, said she has had terrible experiences with payday loans. She got stuck in a cycle of re-borrowing after experiencing some unexpected financial hardship during her divorce.

After more than a dozen consecutive pay periods getting a payday loan, it took her nearly two years to get out of the cycle. Hannah said even while getting the loans, she was doing little things to save money. She downgraded her cable and internet services. She lowered her thermostat and turned off lights that weren’t needed. Hannah said she even started washing her clothes in cold water to keep the water heater from working so much.

“With my divorce, my household income was cut by more than half,” she said. “I still had all the same bills and much less money to pay them. The first few payday loans helped a lot, but after a month or so, I knew I was getting in over my head. Each time I got one, I told myself that was the last one.”

Now that she is no longer using payday loans, she said she is still suffering ramifications.

“They ruin people’s credit score when they believe it is helping. They look up your credit every time you go get a payday loan,” she said. “It is not worth going. Since the pandemic, they have lost business. People will continue to come each month depending on when they get paid. Most of the time, they can’t get away because of financial reasons and sometimes they will wait until income tax time to pay it off. Eventually, they will come back to get more payday loans.”

Hannah said she is still working on repairing her credit and has used her experience to educate her children about the dangers of high-interest loans.

“I tried to hide the financial trouble from my kids, and for the most part, I think I did that,” she said. “If they had been older at the time, I think they could have figured it out on their own. I have always worked a full-time job. My kids had always seen me go to work and come home, and they always have. There were times when I didn’t know if I was ever going to get out of the payday loan cycle, but by doing what I had to do and with a little luck, I did. I hope no one has to go through something like this. An expensive form of borrowing makes no sense when you are doing it because money is tight.”

The problem with payday loans

The interest rates for payday loans can be expensive and difficult to pay off. Research conducted by the Consumer Financial Protection Bureau found that nearly 1-in-4 payday loans are re-borrowed nine times or more. It takes borrowers roughly five months to pay off the loans and costs them an average of $520 in finance charges besides the original loan amount, according to a report by Pew Charitable Trusts.

The average interest rate for a $300, 14-day payday loan in Kentucky is 469%, according to the Center for Responsible Lending. Senate Bill 165, sponsored by Kentucky state Sen. Jason Howell, R-Murray, would increase the charges consumer loan companies may charge. Howell did not respond to a request for an interview.

The number of Kentucky residents getting payday loans decreased 20% from March 2019 to the beginning of the pandemic in March 2020, according to a report provided to the Kentucky Department of Financial Institutions by the loan processing firm Veritec Solutions. That represents a drop in lending of $8.3 million in the short-term, typically high-interest loans. The average payday loan in Kentucky is $348, according to the report.

Critics of the industry say the loans trap borrowers, including those in economically distressed Appalachia, into a cycle of debt. Research from the CFPB shows that over 75% of payday loan fees come from people who borrow more than 10 times in a year.

Stacy Smith works at a bank in Kentucky. She said she would like to see payday loans made illegal.

“I see so many clients end up in bad situations because of payday loans,” she said.

Ending the cycle of poverty

In late 2020 and early 2021, several states moved to limit payday loan interest rates to protect consumers from getting in over their heads with these traditionally high-cost loans during the COVID-19 pandemic.

About 200 million Americans live in states that allow payday lending without heavy restrictions, according to the Center for Responsible Lending. Even during the pandemic, consumers continued seeking payday loans with triple-digit interest rates.

The rate of workers taking out payday loans tripled because of the pandemic, a recent survey by Gusto of 530 small business workers found. About 2% of these employees reported using a payday loan before the start of the pandemic, but about 6% said they had used this type of loan since March 2020.

Nebraska residents recently voted to cap payday loan interest rates at 36%. Prior to the ballot initiative’s passage, the average interest for a payday loan was 404%, according to the Nebraskans for Responsible Lending coalition. In January 2021, the Illinois state legislature passed a bill that will also cap rates on consumer loans, including payday and car title, at 36%.

An effort that aims to get residents out of the payday loan cycle is the Kentucky Financial Empowerment Commission’s Kentucky Bank on Network, a statewide partnership committed to increasing bank accessibility and accounts for individuals and businesses across the Commonwealth. The Federal Deposit Insurance Corporation’s How America Banks Survey found that nearly 8% of Kentuckians are “unbanked,” which is higher than the national average of 6%.

“I am thrilled to bring the Bank On Network to the Commonwealth,” said Matt Frey, KFEC executive director. “Having a bank relationship is the first fundamental step for many individuals and businesses on their financial empowerment journey. Through the Bank On Network, organizations and financial institutions have a great opportunity to improve their communities.”

KBON members include organizations committed to increasing account access in Kentucky. Partners will learn from each other to build Bank On across Kentucky. KBON will increase account access for those in need, Frey said. KBON is an expansion of Bank On Louisville. Launched in 2010, Bank On Louisville is a collaborative partnership among local government, financial institutions and community organizations that work to improve the financial stability of unbanked and under-banked residents in Louisville. To date, Bank On Louisville has helped connect more than 47,000 residents to safe and affordable bank accounts and connected more than 25,500 residents to quality financial education.

“Getting payday loans is a cycle you can kind of get wrapped into,” Frey said. “It’s important to identify that it is a cycle, because like a lot of things, you can just get in a bad habit. If you’re part of a difficult system that’s difficult to break out of, what can you do? What steps can you take to fight through that?”

Frey said people are in one of two categories: those just getting started in this cycle of payday lending and those that have become dependent on them.

“For the people just getting started out in this cycle, it’s a slippery slope, and we want to avoid going down that slope any further,” he said. “To do that, my first recommendation to everyone that is in this situation is to get banked — find a financial institution near you where you can cash checks for free so you will not be charged a 400% interest rate or a fee for cashing that check. Because both — the interest rate and the fee for cashing the check — will chip away your income and money you deserve to keep.”

Joining a bank also allows people to start a relationship with that financial institution, which can open up doors to other lending opportunities that are safe and affordable, Frey said.

“You can get a line of credit of maybe $500 down the road and could eventually get access to a mortgage because of that relationship,” he said. “A second benefit of starting a relationship with a financial institution is that it helps you avoid the hassle. If you’re talking about Eastern Kentucky, as I understand it, public transportation isn’t a strong suit, so with those barriers in mind, how are you supposed to know what’s the value of having a relationship with a financial institution setting up a bank account when you can even get that started in the first place or can’t even get there?”

Frey said life can be expensive when one does not have access to a lot of resources and pride can often contribute to falling into the cycle of payday loans.

“It can be embarrassing to ask for a small loan from a family member or a close friend,” he said. “But what you have to do is try to put that pride aside.”

Low-interest micro loans from a financial institution and other financial alternatives can also help people curb the cycle of payday loans. Frey cited a community development financial institution called Redbud Financial Alternatives based in Hazard, Kentucky.

“They do credit consolidation, educational workshops for recidivism and just all sorts of efforts to help people break through this cycle,” he said. “There are a lot of resources. It can be discomforting as an individual to be encountering new situations. This is something that many people go through. According to the FDIC, nearly 8% of Kentuckians don’t have a bank account, and what can we imagine about their behaviors with payday lending beyond that?”

Small-dollar, high-interest payday loans are available in over half of US states without many restrictions. Typically, consumers simply need to walk into a lender with a valid ID, proof of income and a bank account to get one.

Currently, there are a handful of states — Arkansas, Arizona, Colorado, Connecticut, Georgia, Maryland, Massachusetts, Montana, Nebraska, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, South Dakota, Vermont and West Virginia — and Washington, DC, that cap payday loan interest at 36% or lower, according to the CRL.

States that do not have caps have very high interest rates. Texas has the highest payday loan rates in the US at 664%, more than 40 times the average credit card interest rate of 16.12%. Texas’ standing is a change from three years ago when Ohio had the highest payday loan rates at 677%. Ohio placed restrictions on rates, loan amounts and duration in 2019, that brought the typical rate down to 138%.

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Block CFO says customers repay almost all buy now, pay later loans

Block CFO says customers repay almost all buy now, pay later loans


Nearly all of Afterpay’s customers repaid their installments in 2021, Block CFO Amrita Ahuja told CNBC on Thursday when questioned about the Cash App parent’s acquisition of the buy-now, pay-later service.

“What I will say about losses, is that the team has actually been incredibly deliberate in managing consumer losses as an input rather than an output to growth,” Ahuja said in an interview on “Mad Money.”

She later added, “98% of consumer installments were repaid by the end of the year, which is the same percentage we saw in the first half. This is a key focus area for us.”

When Cramer questioned Ahuja about whether the phrase “buy now, pay never” rings true, she said that consumer losses for Afterpay were up 8 basis points in the second half of 2021 compared to the first half of the year. A basis point equals 0.01%.

Ahuja’s comments come after the company formerly known as Square reported a better-than-expected fourth quarter Feb. 24. Block shares closed down 8.08% this Thursday, well below its 52-week high.

Block closed its acquisition of Afterpay in January, a deal that came after buy now, pay later services saw their popularity soar during the coronavirus pandemic.

“We know that our sellers are asking for buy now,-pay later. They want access to the tens of millions of millennials and Gen Z consumers who are looking outside of the traditional financial system for credit,” she said

Ahuja also said that Block launched a product integration with Square’s online platform on “day one,” with more to come.

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LendingUSA Personal Loans Review 2022| U.S. News

 LendingUSA Personal Loans Review 2022|  U.S. News


LendingUSA was founded in 2015 to be a lending solution for merchants. LendingUSA provides point-of-sale customer financing through more than 10,000 merchant partners in various sectors including medical services, pet services, funeral services and consumer services.

  • Getting preapproved for a LendingUSA loan will not impact your credit score.
  • In some cases, borrowers who can repay their loan within six months can avoid paying any interest.
  • There are no prepayment penalties.

  • Borrowers pay an origination fee up to 8% of the loan.
  • LendingUSA does not offer loans for borrowers in any US territory or Colorado, Connecticut, Iowa, Maryland, North Dakota, New Hampshire, Nevada, New York, Vermont or West Virginia.

LendingUSA offers financing for consumers to give them extra time to pay for certain services related to health care, funeral costs, pet care and other purchases. Loan options are offered by the merchant at the time of the sale.


You apply for LendingUSA loans online, typically at the service provider’s location. The first step is to see if you are preapproved for the loan and check your rate. In a couple of minutes, you’ll get a decision. If you go forward and complete the full application, then there will be a hard credit pull.

From there, the loan goes through the underwriting process, which typically takes between three and five business days. Once the loan is approved, you’ll have 30 days to make your first payment.

LendingUSA offers loans for medical services (audiology, chiropractic, cosmetic surgery, dental, dermatology, general health care, vision, medical devices and weight loss); funeral services; pet services (veterinary and pet retail); and consumer services.

  • Medical services loans range from $1,000 to $47,500, but some industries have lower caps.
  • Funeral services loans range from $1,000 to $10,000.
  • Pet services loans range from $1,000 to $12,000.
  • Consumer services loans range from $1,000 to $47,500.

LendingUSA loans range from a minimum of $1,000 to a maximum of $47,500, with some industries maxing out at lower amounts. Loan terms and rates also vary by loan purpose and the borrower’s creditworthiness. LendingUSA does not disclose specific rate and term information.

There is an origination fee of up to 8% of the principal loan amount , and that may result in an annual percentage rate of up to 29.99%.

While LendingUSA does not disclose information about late fees or penalties, the lender encourages borrowers to get in touch to work something out if a hardship arises.

How Can You Qualify for a

To be eligible for LendingUSA financing, you’ll need to be at least 18 years old with a Social Security number and reside in a state where LendingUSA does business. On the underwriting side, you’ll go through a credit check to determine your credit history, income and ability to repay the loan.

LendingUSA does not disclose specific loan qualifications or minimum requirements, but some applicants may be declined due to a low credit score, insufficient income or other financial factors.

LendingUSA does not disclose the minimum credit score or other credit requirements for approval.

LendingUSA operates in all states but the following: Colorado, Connecticut, Iowa, Maryland, North Dakota, New Hampshire, Nevada, New York, Vermont and West Virginia. It also doesn’t end in any US territory.

Is

LendingUSA has an A+ rating with the Better Business Bureau and is a BBB-accredited business. LendingUSA has a 4.6 out of 5 stars rating on Trustpilot. In 2020, the Consumer Financial Protection Bureau received 13 complaints related to LendingUSA’s personal loans, most of them about problems making payments and with the payoff process. LendingUSA responded to all 13 complaints in a timely manner and closed each with an explanation.

How Is LendingUSA’s Customer Service?

You can reach LendingUSA customer service at 800-994-6177 or via email. Business hours are 6 am to 6 pm Pacific Time Monday through Friday and 9 am to 6 pm PT Saturday and Sunday. There is no chat or text feature offered.

What Are Some of LendingUSA’s Online Features?

The entire loan preapproval and application process is done online. Once the account is open, customers can log in to manage their payments, set up autopay and review their payment history.

LendingUSA

  • People who need extra time to pay for a particular service.
  • People who want fixed monthly payments.
  • People who can pay off a purchase in six months or less to avoid interest.

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How to Finance Equipment for Your Small Business | Small Business Loans and Advice


Business equipment can be expensive. Even smaller costs, such as routine maintenance, add up quickly. Equipment financing is a way of reducing the upfront financial burden of buying or replacing business machines.

Equipment financing refers to using a loan, line of credit or lease to obtain business equipment.

“Almost any type of equipment can be financed if used for a business purpose,” says Mark Kelly, senior vice president and business development manager at Univest. “Whether it’s health care equipment, industrial, construction, energy conservation, technology, titled vehicles, furniture or landscaping equipment, all businesses have equipment needs.”

Here’s more about equipment financing to help you compare your options.

Pros and Cons of Equipment Financing for Small Businesses

  • Conserve cash flow. Equipment financing frees up cash for capital and operating expenses. “Retaining capital and having cash in our current environment could be paramount to a business’s lifeline,” says Steve Scott, chief operating officer of Engage PEO, a human resources outsourcing firm.
  • Hedge against inflation. “Payments are fixed for the entire term of the loan or lease,” Kelly says. “When adjusted for future inflation, the net cost will actually decrease while gross revenues generated by the equipment increase.”
  • Lease to own. You may own the equipment outright or be able to purchase it at the end of the lease.
  • Enjoy tax advantages. Write off the entire purchase price of qualifying new and used equipment in the same tax year that it is placed in service. You could be able to claim a deduction of up to $1,080,000 in 2022.

  • Default risk. If your loan is secured by a blanket bond or personal guarantee, the lender can claim your business or personal assets if you default. That includes the equipment you financed.
  • Down payment requirement. Depending on the type of financing, you may need to make a down payment on the loan: typically 20%.
  • Obsolete or broken equipment. You could end up paying for equipment that is not working or not helping your business.
  • Limited financing for new businesses. Equipment financing can be hard to secure for newer businesses. “Businesses need to be established, usually at least two years,” Kelly says.

Always analyze the costs and benefits of equipment, says Jeff Nager, executive vice president and head of commercial lending at The Bancorp Bank. Ask yourself whether to use business or personal cash to purchase the equipment, he says.

“That may take away needed working capital but keeps the business from having a payment,” Nager says. “If you lease or get a loan, you can preserve cash and build credit, which is very important for many small businesses.”

How Can You Qualify for Equipment Financing?

Qualifications for equipment financing vary among lenders.

Borrowers can generally qualify with at least one year in business, $100,000 or more in annual revenue, and a credit score no lower than 550 to 600, according to small-business lender BlueVine. Guidelines from the online lending marketplace Lendio are $50,000 or more in annual revenue, a credit score of 650 or better and at least a year in business.

Excellent credit is best for an equipment loan, according to small-business lender Kabbage. The lender also says to have a solid business plan, an updated resume, and your personal and business financial statements in order.

What Are Your Equipment Financing Options?

Term loans

A term loan is a traditional business loan that lets you borrow a lump sum and repay it at a fixed or variable interest rate, much like a mortgage or auto loan. You may be able to borrow up to $1 million, according to Funding Circle, a peer-to-peer small-business lender.

“A fixed-term plan has an interest rate that doesn’t change throughout the life of the loan,” Kelly says. “Because the rate doesn’t change, the payment remains the same, resulting in an easy budgeting process for the business.”

The annual percentage rate on term loans ranges from 6% to 25%, Scott says, with a repayment period of one to five years. “Approval and funding are quick, at two business days in many cases,” he says.

But consider loan fees, which can include origination, underwriting and packaging fees, plus collateral or personal guarantee requirements.

Equipment Loans

Business equipment loans are specifically for equipment purchases. You can get an equipment loan from a traditional bank, an online lender or an equipment financing and leasing company.

With an equipment loan, you can finance up to 100% of the equipment’s value, Scott says. “The annual percentage rate can be anywhere from 8% to 30%, with repayment up to the life of the equipment,” he says.

You may need to make a down payment of 5% to 20% of the purchase price. The upside is that an equipment loan can have a fast turnaround.

Approval and funding could take “as little as two business days because the loan is secured with the equipment,” Scott says.

The equipment acts as collateral, which reduces risk for the lender and opens a door for startups to qualify.

SBA 504 Loans

The Small Business Administration’s 504 loan program features fixed-rate loans of up to $5 million for long-term assets, such as a building or equipment or facility improvements.

SBA 504 loans are available through certified development companies, or CDCs, which are community-based partners regulated and certified by the SBA. A CDC finances up to 40% of the loan; a third-party lender, such as a bank or credit union, finances 50%; and the borrower contributes 10%. The portion from the CDC is backed by the SBA.

Loan requirements include:

  • Operating in the US or its possessions as a for-profit company.
  • Having a tangible net worth of less than $15 million.
  • Reporting an average net income of less than $5 million for the last two years.

You can choose from 10- or 20-year repayment terms. APR is determined by the rate for five- and 10-year treasury bonds, which is generally lower than bank rates, Scott says. Note that the loan will include an upfront guarantee fee and an annual service fee.

If you need financing quickly, this might not be the solution for you. One downside to SBA 504 loans is that “approval and funding can take five to eight weeks or longer,” Scott says.

Small Business Line of Credit

A business line of credit allows you to borrow cash as needed instead of as a lump sum. Access funds up to your credit limit, repay and borrow again, similar to a credit card. You will be charged interest only on the amount you borrow.

The lender will set a limit on your small-business line of credit, usually between $10,000 and $100,000. You may be required to secure a line of credit greater than $100,000 with a blanket lien or certificate of deposit.

Requirements for a business line of credit vary. Lenders may consider personal and business credit scores and financial statements, plus your industry, time in business and annual revenue, according to Nav, which matches small business with loans and credit cards.

APRs can be fixed or variable and range from 7% to 36%, Scott says. “Approval and funding are quick, at two business days in many cases,” he says.

Small Business Credit Card

Business credit cards offer a couple of advantages compared with equipment loans or leases. Applications for cards are less time intensive than loans, and cards may have 0% APR offers and ongoing cash back rewards, miles or points.

Disadvantages of financing equipment with a small-business credit card are lower limits and higher APRs than other methods. APRs range from 11% to 24%, Scott says.

If you don’t pay your bill on time, you could be looking at much more expensive equipment over the long term. You may want to reserve your business credit card for less-expensive equipment, such as computers and desks, instead of costly large items, Scott says.

How Do I Apply for Equipment Financing?

The process of applying for an equipment loan is similar to obtaining other types of loans.

Begin by identifying and evaluating potential lenders. But first think about why you need this equipment and how it could affect your revenue, profit and overall business, suggests small-business lender Fora Financial.

“Work with the vendor, your bank and even your accountant to discuss how the payments will impact your business,” Nager says.

Timing the purchase correctly is essential. “Buying additional equipment too early can lead to spending significant dollars on an item not being fully used,” Nager says. “And waiting too long could mean the loss of business or a contract.”

Check eligibility requirements, and make sure you will qualify. Criteria often include credit score, time in business and revenue but vary by lender. If the lender needs a down payment, can you afford it?

Now you can apply, but do not apply to more than one lender at a time because multiple hard credit pulls can hurt your personal and business credit scores. Your lender will likely look at your time in business, credit history and business plan, according to JPMorgan Chase & Co.

Equipment Financing vs. Equipment Leasing

The difference between financing and leasing equipment is that when you finance equipment, you own it until you choose to get rid of it. Leasing gives you access to the equipment only for the duration of the rental agreement, with an option to return the equipment, buy it or renew the lease.

The two most common types of equipment leases are capital leases and operating leases. Capital leases are for long-term access to a major piece of equipment, and you will be responsible for maintaining the equipment. Operating leases are for short-term rentals and, unlike capital leases, can be canceled before they expire.

Which type of lease is better for your business will depend on the equipment and your business needs. A capital lease, also known as a fair market value lease, may be a good choice if the technology you use is constantly evolving.

“FMV leases give small businesses a way to easily upgrade to new equipment when the lease ends,” says Justin Tabone, senior vice president of originations, vendor equipment finance, TIAA Bank. “But a finance lease might be better for equipment such as linear accelerators. They tend to have long, useful lives, and when the lease ends, small businesses may want to keep that equipment.”

Leasing equipment may be best for your business if:

  • You have short-term equipment needs.
  • You must update technology frequently.
  • You are tight on cash.

Leasing can allow you to get equipment and pay no down payment and low upfront costs, make low monthly payments, and deduct lease payments to reduce your taxable income. At the same time, you incur costs without building equity in the equipment and may be locked into the lease for longer than you need the equipment.

Financing equipment may be best for your business if:

  • You plan to keep the equipment for a long time.
  • You use the equipment constantly to generate income.
  • Your company’s cash flow is strong.

The benefits of buying are that you own the equipment, you can sell it if you don’t need it, and you can benefit from tax deductions. However, your monthly payment may be higher than a lease payment, you might need to come up with a big down payment, and outdated equipment may be hard to sell.

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Why You Can’t Use Some Personal Loans To Pay College Tuition

Why You Can't Use Some Personal Loans To Pay College Tuition


Select’s editorial team works independently to review financial products and write articles we think our readers will find useful. We earn a commission from affiliate partners on many offers, but not all offers on Select are from affiliate partners.

A personal loan can be used to cover a variety of expenses, including an unexpected bill, a vacation or even a home repair. And it can be a more cost-effective way to cover these expenses, because some personal loans have lower interest rates than most credit cards, and you can be approved for up to $100,000.

However, there are some personal loan uses that fall under more of a gray area, and college tuition is one of them.

Can you actually use a personal loan to pay college tuition? The short answer is: You’ll need to double check the lender’s terms of use because some of them don’t allow borrowers to use personal loans to pay college tuition.

Restrictions on using personal loans

There’s a thin line between being able to use a personal loan for tuition costs and being prohibited from doing so — and it really comes down to which loans follow certain federal regulations.

Regulations mentioning “private education loans” refer to a form of credit that is not federally insured, does not include a line of credit or any other loan that must be secured and is provided to a borrower for educational expenses, according to the Federal Register.

Personal loans aren’t subsidized or insured by the government, often don’t require a borrower to secure them with collateral, and borrowers may apply for the loan explicitly for the purpose of educational expenses.

But under the 2008 Higher Education Opportunity Act, lenders providing private education loans must make special disclosures, provide a 30-day rumination period, must give borrowers the option to cancel within three days of disbursing the funds and cannot affiliate themselves with schools. These are just some of the regulations that loans for educational use must follow.

Not all lenders offer personal loans that meet all of these requirements. Since they don’t follow these strict regulations, many lenders simply prohibit the use of their personal loans for tuition-related expenses.

Other funding options for students

As long as the lender doesn’t prohibit the use of their personal loan for educational expenses, borrowers are technically free to use one to cover tuition costs.

“The exact uses can be found in the loan agreement itself,” says Leslie Tayne, the founder and manager of Tayne Law Group. “If the loan is designed for you to use it as you please, then it’s generally fine to use the money to pay for college.”

At the same time, though, Tayne explains that it’s highly unlikely that a college student straight out of high school would even have a substantial enough credit history to be approved for a personal loan. Plus, there are some advantages to private student loans that personal loans just don’t offer.

According to Tayne, you’ll generally be charged a lower interest rate on private student loans. If you take out a personal loan, you’ll have to start repaying it immediately. But you may have the option to defer repayments on a private student loan while you’re still in school.

Personal loans typically have shorter repayment terms than private student loans. You only have up to seven years to pay off a personal loan, but with a private student loan you generally have up to 20 years to pay it off. This could mean that your monthly payments on the personal loan will be higher.

Alternatives to personal loans

If you’ve exhausted federal financial aid and private student loan options and still need extra funding to cover expenses like school supplies and textbooks, there are still other lending products out there that are more suitable for students.

A student credit card like the Discover it® Student Cash Back has no annual fee, a short 0% APR intro period on purchases for 6 months (13.24% – 22.24% variable thereafter), and is geared toward students with fair or no credit. But if you’re a student who’s managed to build up a credit history that’s in good standing, you can apply for the Bank of America® Travel Rewards for Students, which also has no annual fee and a generous intro 0% APR period, so you can defer paying off a big expense (or better yet, split it into smaller payments over several months). Plus, new cardholders can earn 25,000 bonus points if they spend $1,000 within the first 90 days of opening the account.

Discover it® Student Cash Back

On Discover’s secure site

  • rewards

    Earn 5% cash back on everyday purchases at different places each quarter like Amazon.com, grocery stores, restaurants, gas stations and when you pay using PayPal, up to the quarterly maximum when you activate. Plus, earn unlimited 1% cash back on all other purchases – automatically.

  • welcome bonus

    Discover will match all the cash back you’ve earned at the end of your first year

  • Annual fee

  • Intro APR

    0% for 6 months on purchases

  • Regular APR

  • Balance transfer fee

    3% intro balance transfer fee, up to 5% fee on future balance transfers (see terms)*

  • Foreign transaction fee

  • Credit needed

Bank of America® Travel Rewards for Students credit card

  • rewards

    Unlimited 1.5 points for every $1 spent on all purchases

  • welcome bonus

    25,000 bonus points after you spend at least $1,000 in purchases in the first 90 days of account opening, which can be redeemed for a $250 statement credit toward qualifying travel purchases

  • Annual fee

  • Intro APR

    0% APR for the first 12 billing cycles on purchases

  • Regular APR

    13.99% to 23.99% variable

  • Balance transfer fee

    Either $10 or 3%, whichever is greater

  • Foreign transaction fee

  • Credit needed

Bottom line

Although you may not be able to use some personal loans to cover the costs of tuition, consider exhausting your other funding options first, like federal student aid and private student loans. The terms are often much more beneficial for students and you can feel more confident about setting up a reasonable repayment plan..

For rates and fees of the Discover it® Student Cash Back card, click here.

Information about the Bank of America® Travel Rewards for Students has been collected independently by Select and has not been reviewed or provided by the issuer prior to publication.

Editorial Notes: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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I have 4 degrees and owe $197K in student loans. What should I do?

 I have 4 degrees and owe $197K in student loans.  What should I do?


How to get out of student loan debt

Getty Images/iStockphoto

Question: I am 55 and a mental health therapist. I have $197,000 in student loans that were for four degrees, plus some in Parent Plus loans for each of my adult children. At the time of attending school, we barely got by and some of the money was used to live on. The last time I talked to the loan servicer; they said my payment was $1,900 per month. Most months, my bring home pay is $2,000; sometimes less.

I am applying for income-driven repayment, but I am concerned I will never pay off the loans. I have numerous health issues and I worry that my ability to pay the loans is dwindling. I also see that any reasonable payment will not even cover the interest. I still have no retirement, savings, or 401(k). As my health deteriorates further, and I need to work fewer hours or not at all; what happens to the loans? The reality of the situation is that I probably need to send my entire check to them now to have any possibility of eliminating the debt. I am also concerned about whether or not the debt is released if I die. What should I do?

Answer: Having six figures in student loan debt can feel overwhelming, but the good news is that you are already making one very smart decision: trying to get on an income-driven repayment plan. These plans are “available for all direct loans including Parent PLUS loans,” explains Anna Helhoski, student loan expert at NerdWallet. Depending on which repayment plan you apply and qualify for, loans are forgiven after 20 or 25 years of payments, even if your monthly payment is $0 based on your income. In order to take advantage of one of the income-based repayment plans, you’ll have to consolidate your loans into one new direct loan. Helhoski recommends using this Federal Student Aid’s Loan Simulator to see how much you might pay under different plans. (Note that refinancing federal loans will strip them of some of the perks like income-driven repayment plans; if however, any of your loans are private loans, refinancing rates are low now ⁠— see the lowest student loan refinancing rates you might qualify for here ⁠—so a refi might be worth considering.)

Have a question about getting out of student loan or other debt? Email [email protected]

That all said, this is a lot of debt, so it may help you to get a pro to take a look. The Institute of Student Loan Advisors (TISLA) offers free student loan advice and the National Foundation for Credit Counseling (NFCC) assists with free debt management plans and student loan counseling as well as credit report reviews and bankruptcy counselling. “You need to work with someone who is well versed both in the different forms of federal student and Parent Plus loans, as well as a trained debt counselor,” says principal and founding member of Clarity Northwest Lisa Weil.

What about disability?

“You might look into eligibility for a Total and Permanent Disability (TPD) discharge if your medical issues eventually keep you from being able to work,” says Andrew Pentis, certified student loans counselor and student debt expert at Student Loan Hero says. This requires that a doctor certifies that a borrower is unable to engage in substantial gainful activity because of a permanent disability; if that is accurate, their federal student loan may be discharged. “About half of private student loans offer a similar disability discharge,” says Mark Kantrowitz, author of Who Graduates From College? Who Doesn’t? .

What happens to your student loan debt when you die?

While it’s not something borrowers want to think about, those with high debt who are older or have health concerns might be worried about what would happen if they still have student loans when they die. “The somewhat comforting news is that your loved ones won’t be stuck paying off bills for federal student loans if you die, and parents won’t have to repay PLUS loans if the student whom the parent borrowed the loan for dies,” says Helhoski. If you pass away, your spouse would need to provide a copy of the death certificate to have the remaining federal loans discharged, says Pentis. Note that private loans work a bit differently: Debt taken out for your own schooling will likely be discharged, but a private loan that a parent co-signs might not.

Questions edited for brevity and clarity.

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