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Bank Loans

Discussion in 'Archipelago' started by LegendOfTheEpic, Sep 25, 2010.


The Gates of Horn and Ivory

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  1. LegendOfTheEpic

    LegendOfTheEpic Member

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    458
    I've no idea if this post is in the right forum. I imagine this will do, though.

    So, I'm looking to take our a personal bank loan. Probably from Chase, because I was going to switch my banking to them anyway. I figured it'd grease the wheel if I did all that together (I don't know why, but it feels like it would). Only problem is, I know nothing about personal loans.

    I went to Chase's website, and it seems like they give out very specific loans for specific things. Well, I hope that's not the case, because I need my loan for very unspecific things.

    Anybody know anything about bank loans in America? Like, what the pay-back rate tends to be, and how interest works, and yada yada? I googled it, but everything you find on google was written by an untrustworthy bank employee. I'm only looking to take out about 5K. Not, y'know, a quadrillion dollars.

    Uma! You're a genius and what not. Thoughts?
     
  2. Crazy Dave Number 23

    Crazy Dave Number 23 Methodless Madness Staff Member

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    11,257
    I have never known anyone to take one myself, but my understanding is that the personal loan is notorious for specifics. An outlined plan of costs, and documented plan of repayment. Also you need to have property, such as a house, that they can take from you in case you fail to pay up. If you don't have much credit history then you need a cosigner able (in the bank's eyes) to be responsible for your debt to them.

    The only time I almost had need of a legitimate loan was for tuition costs, and in that event it was easier for my folks to take the loan and get the preferred rate than to even bother putting my name on it.

    Not having good credit or the ability to take a loan from another institution you have been giving your money to for awhile (such as an insurance company) really hampers your chances of being approved. The rates vary a great deal between banks and what they think of you, so all you can do is the gritwork of seeing loan officers of as many institutions as you can tolerate. The difficulties I have heard in getting loans has made me never want to try to get one, but what I know is hearsay.
     
  3. Umaeril

    Umaeril -o-}}}X{{{-o- Staff Member

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    44,410
    I took out a loan for 5k from the bank for a specific home improvement project - putting in a nice paved patio and some landscaping in my tiny backyard area. The loan was paid off in 12 months at $450/month at 9% interest. Therefore, it cost me $450 to take out a 5k loan.

    I am not sure a bank loan is the way to go or if they would give you one without owning something like a house. They do have the best interest rates though.

    All this really depends on your finances. If you are just trying to work up a good credit history then I would do it differently.

    Additionally, there are credit unions depending on what kind of work you do. If your parents are members of a credit union then you can usually get an account with one and they have low interest loans.

    This sounds kind of scattered but that is because I don't know anything about your situation.
     
  4. Fa Shi

    Fa Shi Moderator Staff Member

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    19,754
    What is the loan for? If it is not for something urgent, I advise against taking a loan. As Uma pointed out, she spent $400 to get a $5k loan, which is expensive. In other words, if you will wait one whole year to buy whatever it is you need, you save $400.

    Loans are the devil... just don't make a habit of taking out loans.

    Also, you don't have to tell us, but think of your income and property. Now, I don't know your profession, but if you're a student, then this is a legitimate concern. If your income is low and you have no property, even if they don't reject you, they will charge you a higher rate than those with good jobs and a house. This is because you are deemed to be a riskier client, and banks will require higher returns for riskier business. In other words, your cost of borrowing will be high.

    If you are willing to share with us your income and what the heck this money is for, then we can make better suggestions...
     
  5. LegendOfTheEpic

    LegendOfTheEpic Member

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    458
    I'm willing.

    I make about 1,500 a month teaching CPR, which is not so much, but enough for the moment. My girlfriend makes about the same processing college registrations. We're looking to spend half the 5K loan on a car, and half on her going back to school. Both, in the long run, would be very helpful to our situation. Now, the car could be paid for with some saving... perhaps not as immediate as we'd like, but whatever. Her school, however, is a bigger cost.

    I don't really own anything, but I've been paying bills, (cell phone, internet, etc) for some time, and (as I understand) that reflects on your credit as well. As has she. If needed, I'm sure I could find someone to co-sign on such a small bank loan.

    Again, I'm really not sure how this all works. I'm running on logic here, which isn't always truth.
     
  6. LegendOfTheEpic

    LegendOfTheEpic Member

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    458
    Or, maybe I'll find a literary agent instantly, and make thousands of dollars writing. But... uh, unlikely?
     
  7. Crazy Dave Number 23

    Crazy Dave Number 23 Methodless Madness Staff Member

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    11,257
    Is she not eligible for a federal student loan via FAFSA? Depending on her age, she may not have to pay all of it back, and the interest doesn't start until after.
     
  8. Fa Shi

    Fa Shi Moderator Staff Member

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    19,754
    Dave has an excellent idea. =D The only catch with student loans is that it's not written off with bankruptcy, but as long as you know you'll be able to pay it off, might want to consider for a loan. Or heck, apply for grants and scholarships as well and see how they turn out.

    Cars. Hm. As a rule of thumb, buying a car before owning a house is a terrible, terrible idea. (House is #1 priority on property list.)

    First of all, cars normally don't appreciate like houses do. They lose value over time. Secondly, it is often cheaper to use public transportation. You do not have maintenance, fuel, and insurance costs.

    I do not know the specifics, but you should calculate how much you spend annually on public transportation, and then compare to annual car insurance and fuel fees. Don't forget that car depreciation is also a cost. If public transportation is significantly cheaper, don't get the car.

    You should be fine with using the money for school, because I would consider that an investment. But don't take a loan on a car. You should instead save money for a down payment on a house.
     
  9. Crazy Dave Number 23

    Crazy Dave Number 23 Methodless Madness Staff Member

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    11,257
    That reminds me, many of the people I have known who took out student loans also used that money for other things. For example, my friend English used it to pay her part of the rent in Kentucky, which may as well go toward a car. I couldn't guess what amount of money could be loaned to you.

    Most places in the US have terrible mass transit, if any at all; and so, most of us must have a car simply to work. For instance, in my town there are no buses whatsoever, and it would take me seven hours to walk downtown for appointments.
     
  10. LegendOfTheEpic

    LegendOfTheEpic Member

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    458
    Dave: I'm sure she could receive loans via FAFSA, but here's the problem: the money isn't really for tuition. Her tuition, actually, is free, given that she works for CUNY. However, she has preexisting student fees to pay back before she's eligible for such things. So, I don't thing FAFSA would work in that case.

    Fa Shi: I live in New York. For all intents and purposes, the public transportation system is perfectly acceptable here. The problem, of course, is that I don't live in Manhattan, which lowers the convenience of said system. Also, I need the vehicle for work. I sometimes transport large quantities of equipment from place to place.

    Also, owning a house before owning a car in New York is... pretty much impossible. If that were the case, I wouldn't own a car until I was in my thirties.

    I had an idea: instead of a 5K loan, I think I might just get a 2.5K student loan from the bank for her to pay off her fees. Student loans don't get paid back until 6 months after graduation, and 2.5K is a lot less, in the long run. As for the car, perhaps it would be a better idea to save up for that, and put it off until it's more financially viable.
     
  11. Crazy Dave Number 23

    Crazy Dave Number 23 Methodless Madness Staff Member

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    11,257
    I will have to ask my friend Eric about that... he took a loan from FAFSA, although he technically didn't have to pay tuition himself; I don't remember the specifics of how he had gotten it paid for. I am not sure about the whole of the process and don't want to advocate something illegal, but I am pretty sure they don't actually ask what the money is for as long as you enroll in a school.
     
  12. Fa Shi

    Fa Shi Moderator Staff Member

    Messages:
    19,754
    How often do you need to transport a lot of things at once? Can you borrow a friend's car if it's only once in a while? After all, I don't need to buy a truck just because I move every other semester. Is the ability to transport items worth the:

    1. fuel
    2. insurance
    3. depreciation
    4. PARKING

    I didn't think much about parking, but if you're in NY, then parking is a huuuuuge problem. Does your house/apartment give free parking? If you need to park for work, does your workplace provide free parking? If not, I understand $20 a day is a reasonable parking fee in NY. Think of how much money leaks out during a month just for PARKING.

    And yes, I agree, owning a house completely is near impossible at an early age. I should have rephrased that better. Don't buy a car until you have a mortgage on a house, and only until you can afford paying the istallments without any problem. For all purposes, a mortgage is like owning a house in a way that you're downloading a file... you gradually own more percentages of it. Mortgages stop the money leaking out from rent... with rent, you keep bleeding money even though you don't own any part of said place. With a mortgage, it's an investment because you own a fraction of the house and the property appreciates.

    Even then, buy the car only when you have saved enough money; don't take out a loan for something like a car. Start with something cheap and continue saving until you are rich enough to afford a better car (and by afford I don't mean that you buy a $20k car as soon as you have $20k in savings lol).

    The thing with owning a car is... you technically don't "own" it, but you're paying a "rent" on a car. Cars depreciate. Unlike machinery capital, it does not churn out anything, so it is not an investment. It is no different than paying rent for a house in the sense that you are bleeding money for no good reason.

    If a man wants to get healthy... why would he cut himself and let himself bleed all over the place? Your financial health works the same way: don't let money bleed out from your pocket all over the place for no good reason.

    Protip: If and when you go to get a mortgage, get the one with the highest monthly installments that you can reliably pay every single time and the lowest mortgage duration. You generally save a TON of money on a 15-yr mortgage than a 30-yr mortgage.

    Also, I'm not sure if this option is available for house mortgages... But if you don't listen to me anyway and buy a car, do NOT get sucked into the 0% interest rate for car mortgages. This limits your option to refinance.
     

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