Reply
Contributor
Posts: 91
Registered: ‎09-16-2012
0

Re: Extended Repayment - Graduate - 2 year and 4 year - help!

I just want to pay the current interest. Like I mentioned, I intend to pay the loan off in under 4 years (maybe even 2). But I want to keep my obligated-can't-go-back-on monthly payments low, and any more of a payment, being extra to help pay it down.

Frequent Contributor
Posts: 361
Registered: ‎10-25-2012
0

Re: Extended Repayment - Graduate - 2 year and 4 year - help!

Even if you pay a large lump sum and you do not have a payment for ten years it will be factored into your dti ratio. If I paid 10000 I would want it to be applied to the
principal . But whatever you feel comfortable with is what you should do .
Contributor
Posts: 91
Registered: ‎09-16-2012
0

Re: Extended Repayment - Graduate - 2 year and 4 year - help!

Well if I hit hard times and can't afford $400-$500 a month in student loan payments (I live in the Bay Area), at least I won't be obligated to pay it.

 

But does doing an extended repayment plan (2 or 4 years) have any "special" considerations except that it stretches the loan out 25 years?

 

It is basically like a  30 year mortgage instead of a 15 year one?

Established Contributor
Posts: 721
Registered: ‎11-27-2012
0

Re: Extended Repayment - Graduate - 2 year and 4 year - help!

It appears that the monthly payment of $400 isn't comfortable but you also do not want to be on a 25 year payment plan.

 

A few considerations before making a lump sum payment:

 

Do you have an emergency fund?

What does your retirement savings look like currently?

Do you have other debt that makes sense to service faster or more intensely?

 

I caution anyone trying to beat the terms of their loan repayment because you are entirely at the mercy of the payment processing team in how payments are applied plus the customer service reps who will inevitably be fixing their mistakes not to mention how much time you are going to spend tracking and explaining things to them. I worked in the banking industry and can tell you all sorts of stories about how payment processing goes amiss. It really screws with the loan amortization!

 

If I were you, I'd take the longer term repayment plan at a lower monthly payment. It frees up your current resources while not putting you in a bind to deal with other financial priorities that you might have. It also still allows you to build a good payment history for however long you desire. I believe you can knock 0.25% off using recurring ACH withdrawal as your form of payment as well. Just because you have a 25 year repayment plan at $XXX/month does not mean that you can't pay additional amounts going exclusively towards the principal (send separate from your monthly payment and mark PRINCIPAL ONLY on the check). I'd suggest doing this quarterly. By reducing the principal you reduce the amount of interest being charged on the loan as well as decreasing the life span of the loan because more of your regular payments will be allocated to the principal than the interest.

 

There are many amoritizing loan calculators on the internet and some allow you to see the impact of extra payments. A fair number can be downloaded to Excel as well. Spend some time utilizing these tools, thinking about your overall financial picture, what goals you would like to achieve in the next couple of years, etc. and understand the limitations of the servicer.

Current Score: TU: 672 | EQ: 720 | EX: 717 | Last Inq. 2/16/15...Locked Up in The Garden

NFCU Cash Rewards $14K | Chase Sapphire Preferred $5K | Amex Blue Cash Preferred $2K | Cap1 Platinum MC $6K | CapOne Platinum MC $1.5K | Cap1 Platinum Visa $1.5K

Contributor
Posts: 91
Registered: ‎09-16-2012
0

Re: Extended Repayment - Graduate - 2 year and 4 year - help!

Hey thanks for the response.

 

I do have an emergancy fund set up just in case.

My retirement savings is pretty non-existant right now, so I'm focusing on funding it.

I have no idea debt except minor periodic credit card that I pay off every month.

 

My concern was that I get on a 25 year plan that I can't pre-pay and get forced interest on. I'd be game to pay my yearly IRS deductible ($5200 a year) where I would pay off the loan in 4-5 years. But I would immediately (after approval) move to pay down or pay off the 7% interest.

Established Contributor
Posts: 721
Registered: ‎11-27-2012
0

Re: Extended Repayment - Graduate - 2 year and 4 year - help!

See if they can send you a loan term document. As long as it doesn't say that you cannot prepay or there is a penalty involved for prepayment then you can pay as I suggested above. Get some funds into your retirement account (set it and forget it seriously) and funnel whatever extra you have towards the student loans.

Current Score: TU: 672 | EQ: 720 | EX: 717 | Last Inq. 2/16/15...Locked Up in The Garden

NFCU Cash Rewards $14K | Chase Sapphire Preferred $5K | Amex Blue Cash Preferred $2K | Cap1 Platinum MC $6K | CapOne Platinum MC $1.5K | Cap1 Platinum Visa $1.5K

Contributor
Posts: 91
Registered: ‎09-16-2012
0

Re: Extended Repayment - Graduate - 2 year and 4 year - help!

Wait. Why would this be factored into my DTI? Wouldnt it help paying a lump $10K down, no?

Community Leader<br> Valued Contributor</br>
Community Leader
Valued Contributor
Posts: 1,284
Registered: ‎06-09-2008
0

Re: Extended Repayment - Graduate - 2 year and 4 year - help!

Most lenders use your reported monthly payment in calculating your debt-to-income, rather than the total balance.  Even if you pay well ahead, most lenders will still report your expected payment amount on your credit report, or when another lender contacts them for information, so the full payment would factor into your DTI until you pay off the loan entirely.

Established Contributor
Posts: 747
Registered: ‎10-15-2012
0

Re: Extended Repayment - Graduate - 2 year and 4 year - help!

I'm pretty sure if you make a lump sum payment  AND delay the due date it will be applied to both future principal and interest. Once again, not saving you any money. If you can pay off any of your high interest loans in full do that.

 

If you can afford to pay off most of your loans now and do so, you can quickly start funding your retirement and savings accounts. I think you're just making the situation more complicated than it should be.


Starting Score: 515
Current Score: EQ04 675 EX04 702 TU08 724
Goal Score: 700+

Amex BCP $12300 | PSECU $10000 | Discover IT $9250 | Barclay Ring $6500 | Citi DC $6100 | DCU $5000 | Chase Freedom $4000 | PayPal Extras MC $3000 | US Airways $2400 | Cap 1 QS One $2000 | Cap 1 Platinum $1700 | Union Plus $1000 | Target $200
Established Contributor
Posts: 721
Registered: ‎11-27-2012
0

Re: Extended Repayment - Graduate - 2 year and 4 year - help!

Debt-to-income ratio is based on the reported normal monthly payments. If you were to make a lump sum payment it doesn't not change the terms of the repayment agreement. Don't make it more complicated than it has to be.

Current Score: TU: 672 | EQ: 720 | EX: 717 | Last Inq. 2/16/15...Locked Up in The Garden

NFCU Cash Rewards $14K | Chase Sapphire Preferred $5K | Amex Blue Cash Preferred $2K | Cap1 Platinum MC $6K | CapOne Platinum MC $1.5K | Cap1 Platinum Visa $1.5K

Advertiser Disclosure: The listings that appear on myFICO are from companies from which myFICO receives compensation, which may impact how and where products appear on myFICO (including, for example, the order in which they appear). myFICO does not review or include all companies or all available products.
† Credit cards for FICO Score ranges: The score ranges are guidelines based on actual applicant approvals and having a FICO Score in a particular range does not guarantee you will be approved for credit cards recommended in that range.

Copyright ©2001-2015 Fair Isaac Corporation. All rights reserved.   | Terms of Use | Privacy Policy | Sitemap

IMPORTANT INFORMATION: All FICO® Score products made available on myFICO.com include a FICO® Score 8, along with additional FICO® Score versions. Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more

FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Score and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.