Understanding the Different Types of

Debt

Federal student loans usually have the lowest interest rate Have to start making payments 6 months after graduation Making payments while in school will save you money on interest Possibility of being forgiven Always a fixed interest rate

Different types of student loans- Direct Subsidized Loans (Undergraduates) 4.66%, interest payments

paid by government while in school- Direct Unsubsidized Loans (Undergraduates) 4.66%, Interest accrues

while in school- Direct Unsubsidized Loans (Graduate or Professional Students)

6.21% Interest accrues while in school- Direct PLUS Loans (Parents and Graduate or Professional Students)

7.21%, Interest accrues while in school

Student Loans

Generally charge a higher rate than federal student loans

Interest rate based on credit score Having a co-signer will result in a lower rate Interest rate can be fixed or variable Variable rates – charge a percent plus some

kind of rate instrument, Prime Rate or LiborEx: Libor + 2%

Personal Loans

Commonly the most expensive form of debt Can be fixed or variable interest rateAverage Rates (Bankrate.com)Fixed – 13.02%Variable – 15.7%

Rates much higher if bad credit or no credit If you pay off the balance entirely every

month, no interest is charged

Credit Card Debt

Loans made to purchase a house Interest based on credit score Can be fixed or variableAverage Rates (Bankrate.com)30 Year Fixed – 4.08%15 Year Fixed – 3.29%5/1 ARM – 3.19%

Adjustable rate mortgage (ARM) 5/1: 5 refers to the number of years the interest rate will remain the same,1 refers to the amount of additional interest that can be charged after the initial 5 year period each year

Mortgages

Loans for the purchase of a vehicle Interest rate based on credit score Can be a fixed or variable interest rateAverage Rates (Bankrate.com)5 year fixed, new car – 4.06%3 year fixed, used car – 4.92%

Most commonly use a fixed rate

Car Loans

Can be a loan or used as a line of credit House is used as collateral Can be fixed or variable interest rate Interest rate based on credit scoreAverage Rate (Bankrate.com)Line of credit (HELOC) – 4.81%Loan – 6.15%

Home Equity

Can receive a lower interest rate than previous rate

Fees are associated with a refinanceWhen to consider a refinance- Interest rates have decreased- Large increase in credit score- Can pay off loan in a shorter amount of time- When you are able to find a co-signer

Refinancing Loans