Your Questions About Save Loan Interest

James asks…

barrowimg to save money?

I am 22 and trying to save money I had recently received a letter in the mail about getting a loan from a bank to start to save. I think if I would already have money I would see that as a good thing so I would keep adding to it. Tell me what u think

John answers:

If you want to save money, loans are the worst thing you can do. You will have to pay high interest rates and that will defeat the purpose of saving in the first place.

Thomas asks…

Income Tax saving for Education Loan?

do I get tax benifit on EMI I pay back ???
do I get tax benifit on interest part of EMI ???
Is there any limit to this benifit ???

When can I claim the Simple Interest part of the Edu Loan for IT benifit ???

John answers:

Yes , you do get benefit in taxation on account of payment of loan but ONLY ON interest u/s 80E of the I T Act.
The loan must have been taken for higher studies and deduction shall be allowed for 8 assessment years starting from the asst.years in which the assessee starts paying the interest on loan or until the interest thereon is paid which ever is earlier.

Lizzie asks…

Can tust save simply loans?

If they say you have a loan is it true or not?

John answers:

It’s probably NOT true. They’ll take a fee for “finding” you a loan, but you won’t get one!

NEVER give any of these “loan companies” your bank details, they’re only interested in charging fees, NOT getting you a loan!

Nancy asks…

Is there a way to pay off loans without interest?

I have 2 loans, Sub and Unsub Stafford Loans, and I’m curious to know if what I’ve been told is false or not. My father claims that I can “target” a loan and make payments on that loan without having to pay for the interest of that particular loan. I know how to make payments on my loans individually, obviously someone would pay as much of the bigger loan with the most interest sooner than the smaller one.

So, my question to you is, is there a way to make loan payments (through phone, mail, or online) without having to pay the interest?

John answers:

It depends on the loan.

Your subsidized loans do not accrue interest while you are in school, so if you pay them off before you graduate, then you will not owe any interest on them. The same is true of subsidized loans that are in deferment for other reasons. However, once you leave school, or your loans are no longer in deferment, then interest does begin to accrue, and at that point you will owe it no matter what you do.

Your unsubsidized loans begin to accrue interest from the time that they are disbursed, even if you have deferred payments until after graduation. So, as soon as the money is received by your school you will owe some interest. If you don’t pay that interest while you are in school, then it will be “capitalized”. This means that the interest that accrued while you were deferring the payments will be added to the principal of the loan once it goes into repayment. As a result, you will repay more than you borrowed. In effect, you will be paying interest on the interest. You can avoid this by choosing to repay the interest while you are in school so it doesn’t accrue. This can save you quite a bit over the life of the loan. You will also pay less interest if you pay the loan off sooner, say, by starting your payments while you are in school instead of deferring them, or paying more than the minimum so the loan is paid off early. So, when deciding which loan to pay, many students will put the emphasis on the unsub instead of the sub. But, once the loan is disbursed you cannot avoid interest entirely.

Susan asks…

consolidating loans?

I have 3 different school loans out. Should I consolidate? will it save me money?

John answers:

Consolidating your loans will only save you money if you have Stafford loans that were disbursed prior to July 1st, 2006 with variable interest rates. By doing a federal loan consolidation for these loans with variable interest rates after July 1, 2008 of this year, you will be able to get a fixed rate just over 3% lower than your existing variable rate. It is important that you only include Staffords with a variable rate, as fixed rate federal loans can be added, but will be calculated at a weighted average.

You should not seek to do any private consolidation programs for either private education loans, or private and federal combined (especially not federal). These almost always cost borrowers far more money in the long run.

Consolidating is not a simple topic to answer, and is heavily influenced by the types and amounts of your student loan debt. I encourage you to find a financial aid officer at your school who can give you the best advice on this topic. If you cannot get help there speak with the lender of your federal Stafford loans.

Good luck!

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