taking out a loan

[pboychuk]

Hi,

I have never borrowed money so I was just looking for some advice.
I need to take out a small loan for business 30k-50k, So far I have considered two options:

1) take out a loan against the equity I have in the stock market, I haven't spoken to my broker about this yet so I am unsure of the terms.

2) Get a private student loan. I believe these student loan companies just send you check, unlike government loans which are applied to your tuition (i believe), the reason I am considering this option is because I am a student, and with these loans you dont pay any interest till you graduate. I plan to pay off the loan well before I graudate, so i figure this would be considered free money.. Please correct me if i'm wrong.

Any other ideas would be great.

Thanks

[jasaunders]

Ok, you need a loan. You have a lot more options than you think.

It sounds like you only want (or can) take out a secured loan. Your first plan above is fine, but probably not in your best interest. First of all, most lenders will only lend up to about 50% of the value of your portfolio, so unless you have a $70k portfolio, this isn't going to work. And with the market skepticism today, it is likely they won't even lend on 50% of the value. My question is, why not just withdraw the money to use? Odds are you aren't making more than 10% APY on that money and you won't get a loan much lower than this rate, so it's not worth it to keep the money in and take out a loan. You will have to pay capital gains on the profit, but most likely a good chunk of the money could be deducted for the business.

Your second plan, apart from it being illegal to use student loans to fund things not school related, is a terrible idea. First of all, private student loans usually have a somewhat high interest rate, between 7-10% and in a lot of cases, the lender can adjust the rate whenever they want. However, what's even more troublesome, is that student loans are never discharged during bankruptcies. If, heaven forbid, something happens and you lose everything you have, student loan debts will NOT be discharged. Futhermore, with student loans, although the payment is deferred until graduation, on most loans you still accumulate interest before you graduate (if it's unsubsidized). It is usually better to get the money from a low interest credit card than take out a student loan.

Which brings me to ask, have you explored all your options? Why are you not considering unsecured loans? There is a chance you could get an SBA backed loan or line of credit for the amount you are seeking at a 9-11% interest rate. Not the greatest rate, but doable. Or, if you have good credit, you could take out a personal loan or take the money off a credit card. And if you don't have good credit, you may want to have someone co-sign for you if possible.

[s2008aw]

In the UK my student loan was only charged at 3%. I guess its much higher in the USA.

[pboychuk]

Well i only have 20k, in stock, so that wouldnt work. I am not sure of my credit score, however, I am only 20, and have very little credit, basically I have had a credit card for 2-3 years and never held a balance, also I pay some utilities, other than that I dont know what else would factor into my credit. However, I believe my dad would co-sign. So with this in mind, what do you believe is my best option? Or is impossible to tell without knowing my actual credit score?

[pboychuk]

Oh and the reason I dont really wanna sell my stock is because they are kinda low at this point.

[jasaunders]

Well, before I get into the best option, you NEED to know your FICO score and should know exactly what's on your credit report. Go to annualcreditreport.com and get your reports from the 3 credit reporting companies. Or at least get one of them if you want to save the other two for later in the year. But if you have never checked them, I suggest you get them all.

Also get your FICO score. You could go to myfico.com and get your score for $16.

[pboychuk]

Well, before I get into the best option, you NEED to know your FICO score and should know exactly what's on your credit report. Go to annualcreditreport.com and get your reports from the 3 credit reporting companies. Or at least get one of them if you want to save the other two for later in the year. But if you have never checked them, I suggest you get them all.

Also get your FICO score. You could go to myfico.com and get your score for $16.

My score on Credit Karma -- Free Credit Scores and More -- Home is 707, I believe that is transunion which is a 950 scale. I have tried to use the free sites I assume annualcreditreport.com was one of them, infact georgia residents get two free pulls a year from some agency, However, it seems non of them will show my score, just my report.

[lilbilly]

My score on Credit Karma -- Free Credit Scores and More -- Home is 707, I believe that is transunion which is a 950 scale. I have tried to use the free sites I assume annualcreditreport.com was one of them, infact georgia residents get two free pulls a year from some agency, However, it seems non of them will show my score, just my report.

Don't count on that being your actual score. Some of those companies use a different scoring model and your score could look higher than it would to a mortgage or loan company. Go to the site saunders said and check your FICO score, or call a mortgage broker and say that you are looking to buy a house soon and you want to get your credit in line and ask him to help you - he'll pull your credit for you.

[jasaunders]

Annualcreditreport.com is the website set up by the 3 credit reporting agencies that according to federal law need to give you access to your credit reports once a year. On this website you could get each of your credit reports for free (but they will try to sell you on other products).

You should also get your FICO score, since this is what a large majority of lenders use. I have never heard of Credit Karma, but their website says "In the future, advertisers may give specials discounts to you based on your credit (your karma). " This sounds extremely sketchy to me, that by using their free service and inputting identity information, you will start getting solicitations.

FICO scores go up to 850. There is no where you can get it for free and I would be very skeptical about getting it for free. Paying $15 to get your score is well worth it, as it could mean a huge different in the interest rate you get on a loan.

[lilbilly]

Annualcreditreport.com is the website set up by the 3 credit reporting agencies that according to federal law need to give you access to your credit reports once a year. On this website you could get each of your credit reports for free (but they will try to sell you on other products).

You should also get your FICO score, since this is what a large majority of lenders use. I have never heard of Credit Karma, but their website says "In the future, advertisers may give specials discounts to you based on your credit (your karma). " This sounds extremely sketchy to me, that by using their free service and inputting identity information, you will start getting solicitations.

FICO scores go up to 850. There is no where you can get it for free and I would be very skeptical about getting it for free. Paying $15 to get your score is well worth it, as it could mean a huge different in the interest rate you get on a loan.

Ditto to what he said. I've been a mortgage broker for several years and it's insane how so many people have no idea of what their credit looks like.

[pboychuk]

Ditto to what he said. I've been a mortgage broker for several years and it's insane how so many people have no idea of what their credit looks like.

Well, I have gotten a credit report a few times, never a FICO score because I dont want to pay for it and didnt need to know what the score was. Is tehre any service that gives you unlimited credit score/reports?

[jasaunders]

They will all offer services to monitor your credit score and report for you on a monthly basis. I'm not sure this is worth it.
Other than that, nothing that I know of will give you unlimited access.
But I strongly suggest you spend the $16 to get your score so you know what it is.

[pboychuk]

They will all offer services to monitor your credit score and report for you on a monthly basis. I'm not sure this is worth it.
Other than that, nothing that I know of will give you unlimited access.
But I strongly suggest you spend the $16 to get your score so you know what it is.

Any preference of the 3 agencies, i get to choose one for the credit report.

[jasaunders]

No, you could take all three for the free credit report. You get all three once a year. Get one from each.

[pboychuk]

Apparently I have already used all my free ones from annualcreditreport. But, with myfico.com you also get to choose an agency for one report.