Your Questions About Save Loan Schedule

Donald asks…

What are the basic determinants of investment?

Explain the relationship between the real interest rate and the level of investment. Why is the investment schedule less stable than consumption and saving schedules?

John answers:

When interest rate are low is is cheaper to borrow money so it make it more attractive for firms to borrow and expand. However the more important consideration is the return on investment the expansion will produce. This means that during peak in the business cycle investment increases and demand for loans increase causing interests rates rise and during slumps investment and the demand for loan falls and interest rates decline.

Consumer however, try to maintain the same standard of living over the business cycle and only households the suffer unemployment reduces consumption significantly.

George asks…

How Education loan helps in saving Income Tax?

I have applied for education loan and now I am placed at a decent govt. company. I have to repay my loan with intrests. Can anyone say how this education loan helps in saving my income tax? I have heard that if I have taken loan I have to pay less income tax. Please explain how it can be done. This is the first month of my job and I haven’t received my salary yet hence nor paid any taxes.

John answers:

Money used for for education can be from a variety of sources:
– US Stafford loan (subsidized)
– US Stafford loan (unsubsidized)
– regular commercial loan
– personal resources
– gift paid by a family member to your institution
– etc

Repaying an education loan means that you are going to pay interest. If the loan was for education then then the interest may be deductible as an adjustment to your income when you file your Federal income tax return. You may received IRS Form 1098-E telling you how much interest you paid during the year. The deductiblity of this interest is currently limited to not more than $2,500 annually.

There are at least four (4) ways to get the tax benefit of advancing your education on your tax return. The various ways to apply the benefits to your tax return include:

– The American Opportunity Credit (AOC). This is a credit that cannot exceed $2,500
(1) $1,500 can be used as a nonrefundable tax credit to lower tax liability.
(2) $1,000 as a refundable tax credit.

(3) Tuition and Fees adjustment on page 1 of your Federal Form 1040. This can be as much as $4,000.

(4) As a miscellaneous deduction if you file Schedule A (Itemized Deductions).

The key to understanding these education benefits is that you need to apply the rules correctly. You should receive a Form 1098-T each year from your institution (a copy of this form is provided by your school to the IRS). This form will provide key information (for example, the cost of tuition and how much may have been paid through scholarships or awards). This form will not show how you paid for your education (that is, your loans).

But, use the Form 1098-T to prepare IRS Form 8863 (Education Credit). In this respect if your college charged you $9,000 in tuition and you received a $3,000 award then your net expenses would be $6,000. What this form does not say is what you paid for books, lab fees, travel and other expenses. Be aware there are “expenses” but only specified things that can be called “qualified expenses” (which are limited to not more than $4,000). In my example, your expenses are $6,000. So, complete the Form 8863 using the $4,000 (reading the form and instructions carefully will lead you to the correct entries.

For the tuition and fees deduction other expenses may apply. This is also true for the Schedule A method mentioned above.

Keep your invoices and records.

The loans don’t derive you any tax benefit in and of themselves. To take the credits on your tax return you must be legally responsible for repayment of the loans.

Our government has a goal of advancing the education of the citizenry. The way they do that is through the tax system. Double check your eligibility for one credit vs the other (it depends, for example, if you are a 1st year student, a graduate student, or whether the education is work-related) among other things.

Susan asks…

Should I give money to my friend or spend it on something important for me?

My friend just asked me for money to pay his rent or he risks getting evicted. I have the money to cover it. However I was saving this money to pay off a some legal things because I have warrants for my arrest. Should I loan him the money or just say I don’t have it and pay my warrant.

John answers:

If your friend gets evicted, he may lose more than just not having a home, such as his belongings. As a matter of fact, if he needs money, maybe he can sell some. However, you may be able to help him by lending him money without going to jail, as long as you don’t completely stop paying the legal fees. If you can’t pay in full, try to look like someone who is acting in good faith and paying something but has trouble paying everything. You may get some help and understanding, but only if you seem cooperative and don’t just stop paying.

On the other hand, your friend, too, may be able to negotiate a payment schedule that will allow him to keep his apartment. Check the local laws. In some states, eviction can happen quite quickly. In others, any partial payment maintains the lease and eviction can take a while. Regardless, landlords don’t want to have to look for a new tenant, so they may be willing to negotiate even if they don’t have to.

Your friend can also pay by credit card, if the landlord accepts credit cards, or get a cash advance from a credit card. He should not make a habit out of it but if that prevents eviction and you keep your money, that may work. Or you could lend him money and then use a credit card or a cash advance. It is better if he does it because of the interest, but then, if one of you does not have a credit card, that may be a consideration because it may take some time until you or him get one.

Thomas asks…

What is the benefits of paying additional principal on mortgage?

Hi. I have a 30-year fixed-rate mortgage that I have been paying. Recently I have some extra cash flow so I am thinking about paying additional principal every month. Is it worth doing? Will the additional principal payment reduce the principal starting from the end of the loan term?

For example, my final month of mortgage payment (i.e. month # 360) consists of $1224 of principal and $5 of interest. If this month I pay an additional $1224 toward principal, my loan term will be reduced by 1 month and all I am saving is the $5 of interest for that month (and at the same time I will be losing the tax deductible benefit of interest). Am I understanding this correctly? Thanks.

For example, my final payment
Doesn’t it defeat the purpose of “leveraging” if I pay off the loan early? The idea of leveraging is to use OPM (other people’s money, the bank’s money) to maximize earning (for example, 20% downpayment + 80% borrow). If I pay more toward principal early month, why don’t I just buy the property with 100% cash to begin with?

John answers:

Actually, considering your example, paying toward the outstanding balance years in advance means that last payment is NOT what you SAY it is. In fact, you will have fewer monthly payments to pay AND you will pay less in interest. YOU assume you pay all but the last payment on schedule! Do the math on compound interest. THAT is what mortgage companies DO. If you can add 10% to your monthly payment and apply that toward principle, you will cut your loan down by 10 years or more and pay less interest over the entire loan, to the tune of $150,000 less. I have paid ahead on my mortgage, so a 30 year fixed loan will be paid off in 19 years with a saving of over $150K in interest for the 11 years I was NOT paying interest.

Jenny asks…

Is there a direct webite for loans or grants for single mothers who want to start thier own business?

Or to even to buy a home? I have found a couple of things but then they want you to pay one time fee for access to theses applications?

Thanks!

John answers:

I agree, don’t pay to access information.

There are so many businesses that mothers can do that don’t require large start up fees. How about starting up a “Home based business” Most home based businesses cost under $500. I’m not a single mother, but I can show you what my husband and I have been doing for over six years now. We both work out of our homes around our children’s schedules. We have four kids ages 10,6,4 and 1. It well supports our whole family. There’s a lot of other homebased businesses that can do the same for you. If you’d like some ideas, your more then welcome to take a look at my 360 page on home based business opportunities.
Like I said my husband and I started our home based business over six years ago.We both work out of our home around our children’s school and sports activities. We got involved in an International telecommunications service provider that was started back in 1993. It’s a 15 year old, world wide company that’s in numerous countries. It’s the largest direct selling telecommunications service provider in the world. With headquarters in Farmington Hills, Michigan, Charlotte, Amsterdam, Sydney and Montreal.
They have been featured in several magazines like USA Today, Success, Fortune etc. Inc 500 rated them the 22nd fastest growing company in revenue in it’s first five years. They are registered with the BBB as well.
They market in services people use every day and pay for anyway. Services like Local and Long Distance telephones, Internet, Digital, video phones, Satellite TV, and all the major cellular phone companies like T-Mobile, Verizon, AT&T, Sprint, Nextell, Altell etc with the latest plans and most popular equipment. You help put them on a new 2 year contract plan or upgrading and extending an existing contracts through all the major cellular phone providers. You also help them save money on all their other telecommunication needs as well as Satellite TV. Every single month these people pay their bills, you make a percentage over and over again each month.
How many people do you know, or know of around the world that uses one or more of these services or products? . A lot of money involved in this industry.

There’s so many different businesses to look at with different products and services. Find one that makes the most since to you. If you have any questions feel free to email me at kaiden4@aol.com
Hope this gives you an idea and information that you don’t have to go and get a grant or loan to start a business.

Tiffany

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