Categories
Taxes

Lessons in Saving For Private Education Fees

Families often need a lesson in looking after their money when planning a private education.

Even though they have the best of intentions, the figures just do not add up to cover the many thousands of pounds needed to put just the one child through a private education – let alone two or three.

Families fund education in three main ways:

  • Paying fees from their own income and building a reserve fund on hand to supplement the cost. If both parents work or have the cash resources, they might fund half the cost of education from income and need an investment plan to pay the rest
  • Investing regular amounts in a savings plan to give an income to pay education fees. These parents may have small but regular amounts to save over a long period.
  • Investing a lump sum, like a gift or inheritance to give an income to pay education fees.

Saving to fund education fees is basically the same as setting up any other investment plan, but professional, unbiased advice can help whatever the circumstances.

How much will school fees cost?

Currently, prep boarding fees work out from £4,250 to £6,250 a term and senior boarding from £5000 to £8250. You also need to add in uniforms, games equipment and other incidentals.

The fees depend on the standard of school and the age of the child. Day fees will be less.

Take an average of £5,000 a term, multiply by three terms a year over 13 years covering school from when a child is five until they are 18 and the figure is a staggering £200,000.

Once you have this figure, calculate the time between now and when your child starts at the school. This will give you some idea of what you need to save and the timescale to meet that amount.

Then, sit down with an independent advisor regulated in the UK by the Financial Services Authority, and draw up a strategy that matches your objectives.

Obviously, if you have more than one child you want to put through school, then this has to be factored in to the equation as well.

Don’t forget to consider interest rates and inflation as these could have a dramatic effect on your investment. One solution to offset these is saving more than you need as a cash reserve.

Keeping private education costs in the family

Parents and grandparents contributing in to a pot often pay education fees. Tax effective investments that may involve taking specialist advice about trusts or family foundations. Although this may seem expensive, this good advice should serve the family well over the years.

Often, if the family is living across several countries, a spread of investments is a strategy that can take best advantage of tax rules in different countries, which is just one service that a leading Wealth Management firm can offer.

For instance, if the grandparents live in the UK and aged 50 or over on the 5 April 2010, they can invest up to £10,200 in an ISA with half as cash and the balance in other investments like stocks and shares.

If the parents live overseas, then many investment options are open to them, including international life insurance savings plans.

Estate planning to consider how to legitimately avoid inheritance taxes in the UK and overseas is an important part, of any school fee strategy.

For instance, the grandparents might decide to skip a generation and leave their estate in trust to their grandchildren with the parents as trustees to fund education fees.

Other tax effective investment opportunities to consider include:

  • Children’s annual income and capital gains tax allowances
  • Options to re-assign life policies and investment bonds
  • Tax-free returns available through offsetting against a personal mortgage
  • Opportunities available through offshore investments

When to start saving for private school fees

Forward thinking parents should start saving as soon as they can – even if they don’t yet have any children. The longer the investment period, the more likely the fund will grow without too much strain on the budget for other expenses.

Categories
Wealth Building

Offshore Private Placement Life Insurance Dynasty Trust – Funding Through Multiple Grantors

Private placement life insurance (PPLI) typically requires a minimum premium commitment of $ 1 million or more. By pooling their available assets, two or more grantors of (ie, contributors to) an irrevocable life insurance trust (ILIT) can reach the minimum premium commitment of a PPLI policy. The insured may be one of the grantors, but need not be.

Through creative drafting of the trust document, an ILIT (also known as a dynasty trust) can provide for multiple grantors (contributors) and various beneficiaries. Each of the grantors allocates part of his lifetime gift and estate tax exemption and generation-skipping transfer tax (GSTT) exemption to cover his contribution to the trust.

A tax-efficient method of building wealth in a dynasty trust is the purchase of a private placement life insurance (PPLI) policy that serves as an "insurance wrapper" around investments. As a result, investments grow tax-free during the life of the insured, and upon death of the insured, proceeds are paid to the trust free of estate taxes. PPLI is especially useful for holding tax-inefficient short-term investments, such as hedge funds, as well as long-term high-growth investments, such as venture capital and start-up businesses.

Domestic insurance companies offering PPLI in the US typically require a minimum insurance premium commitment of $ 10 million to $ 50 million. Offshore insurance carriers are more flexible, but still seek a minimum premium commitment of about $ 1 million. This means that many potentially interested individuals or married couples from the economic middle class simply cannot enjoy the same investment and tax advantages as rich people.

In a typical PPLI-dynasty-trust scenario, an individual wealthy grantor contributes several million dollars cash or property to an offshore asset protection dynasty trust, and the trust purchases PPLI on the grantor's life. If the grantor cannot afford at least one million dollars, however, PPLI cannot be purchased.

In contrast, when multiple grantors contribute assets to a single dynasty trust, the trust is more likely to have sufficient funds for purchasing an offshore PPLI policy. For example, three hypothetical grantors might each contribute $ 400,000 worth of assets to a dynasty trust. With $ 1.2 million of assets, the dynasty trust could purchase an offshore PPLI policy, insuring the life of a suitable individual. Assets within the PPLI wrapper grow free of income and capital gains taxes. When the insured dies, the trust receives the policy proceeds free of income and estate taxes, and beneficiaries receive trust benefits free of estate and GSST taxes perpetually.

The greater investment flexibility of PPLI compared with conventional life-insurance is the ability to invest policy funds in high-return assets, such as hedge funds or start-up companies. Another important advantage of offshore PPLI is the ability of the insurance purchaser to make in-kind premium payments. For example, if one or several grantors contribute stocks, bonds, or business interests to the trust, then the trust can fund the PPLI policy with in-kind assets instead of cash.

In some circumstances, each of several grantors (contributors) will have his own ideas about how to design an irrevocable, discretionary, asset protection dynasty trust and will bring his own list of beneficiaries. Accordingly, the design and implementation of a multi-grantor trust function well when the grantors have common interests and common goals, as might exist among family members. Presumably, the number of beneficiaries increases with the number of grantors, so that trust benefits might become diluted. On the other hand, since more grantors mean more initial contributions and greater trust assets, these factors should balance. In any case, since the trustee (s) of a dynasty trust must possess substantial discretionary authority in order to achieve asset protection, a rigid allocation of benefits among beneficiaries is usually not desirable.

Grantors (contributors) of an irrevocable, discretionary PPLI dynasty trust may benefit (at the discretion of the trustee) from trust assets. As investments in the PPLI wrapper grow tax-free, beneficiaries (including grantors) may benefit from tax free loans of the PPLI policy to the trust. Upon death of the insured, insurance benefits are received tax-free by the trust. The trust could then purchase another PPLI policy to continue tax-free investment growth.

By contributing to a multi-grantor dynasty trust that then purchases and owns offshore PPLI, individuals from the economic middle class are now able to utilize a tax saving, wealth building, asset protection technique generally available only to the rich.

Warning & Disclaimer: This is not legal or tax advice.

Copyright 2010 – Thomas Swenson

Categories
Insurance

Some Key Facts When Buying Private Medical Insurance Schemes in the UK

It is the prerogative of the insurance buyer to find and understand the rights of policy holders before purchasing a personal medical insurance (PMI). It is important to read the terms and conditions of the policy document carefully and to know exactly what is not covered.

Some key facts to note before buying medical insurance:

Regulation

The Prudential Regulatory Authority (PRA) and the Financial Conduct Authority (FCA) regulate private medical insurance policies in the UK. This was earlier done by the Financial Services Authority (FSA).

Complaints

Private medical insurance providers and brokers are required by the FCA to have complaints procedures in place. In case one is not satisfied with the response of the insurance company in resolving a problem, one may approach the Financial Ombudsman Service (FOS). It is a free and independent service to settle disputes.

Compensation

The Financial Services Compensation Scheme (FSCS) is UK’s legal fund for clients of authorised financial services. It is an independent organisation set up under the Financial Services and Markets Act 2000. In the event of insolvency of the insurer or its inability to honour a claim, the FSCS pays compensation to the insurance holder.

Confidentiality

The Data Protection Act 1998 and other ancillary laws mandate medical insurer companies to treat personal information including medical details confidentially. Insurers are required to inform policyholders about personal information usage and circumstances when such information is shared with third parties. Policyholders have the right to seek details of information an insurer has about them.

Declaration of Medical History

Medical insurance providers require a buyer to disclose medical history in the application for cover at the time of purchase. This is done in two ways.

• Full Medical Underwriting: This entails declaring your full medical history. It is advisable to disclose everything and not withhold any information. An insurer has the right to refuse a claim if it is found later that one was already suffering from or has suffered from a particular condition in the past. It is important to note that medical insurance companies usually do not provide cover for ‘pre-existing conditions’ when starting a new policy for the first time.

• Moratorium Underwriting: Most insurance companies offer this option where details of personal medical history are not required. With a moratorium scheme, you do not have to provide detailed medical information; however, pre-existing conditions within the last five years of the commencement date of the policy are not covered under the plan, unless you have been symptom or treatment free for a period of two consecutive years.

Categories
Student Loans

Private Student Loans: 3 Ways to Improve Approval Chances

Financing a college education is not easy, with college fees anything but cheap. While it is possible to get government sponsored financial aid, not everyone is successful because of the quota system reserving funds for those in most need. For many, private student loans are the only option open to them.

Of course, there is nothing wrong with the private loan option, but securing this kind of funding is dependent on the same criteria to getting any other kind of loan. So, an applicant needs to have certain aspects in good order if college loan approval is to be achieved.

There are problems with this since students usually have little income to speak of. But there are student loan options to consider that can help in finding the right loan deal at the best possible terms. Compromises may need to be accepted, but the funds at least can be secured.

1. Find a Cosigner

Since the biggest issue for lenders is the certainty of receiving the monthly repayments, the addition of a cosigner to the application can prove invaluable. A cosigner acts as a guarantor, assuring the lender that payments on the private student loan will be made, even if the student is unable to make them.

The most common cosigner for students is their own parents but extended family members and even friends are acceptable too. However, to stand a chance of getting college loan approval, the cosigner must have an excellent credit history. Ideally, they should have a score of 700 or more, and have a large enough income to cover the repayments if that becomes necessary.

But if a suitable candidate can be found to cosign on the student loan, remember that failure to pay will put pressure on them. So, be clear that the obligation still rests on the shoulders of the applicant.

2. Search the Internet

The Internet has changed many things about how we go about securing financing. The development of comparison sites means that finding the best possible deals, even for private student loans, is fast and easy, with the best of thousands listed clearly before us.

Online lenders are widely recognized as experts in bad credit lending, so those who have very poor credit histories are more likely to get college loan approval from them than they are from traditional lenders. And they charge the lowest interest rates and offer the most flexible repayment schedules.

Still, it is necessary to read the small print on any possible student loan deal to see if there are any hidden charges. And check the reputation of the lender on either the Better Business Bureau or the Verify1st websites before agreeing to anything.

3. Tend To Your Credit Rating

Another valuable move to help in securing a private student loans is to set about improving your own credit score. This improves the terms of the possible loan, making it more affordable. There are several ways to do this, but starts with getting the credit report to identify where the weaknesses lie, and have any errors in the report corrected.

Paying off existing debts is the best way to increase the score. But to do this, a series of small, quickly repaid loans are required. Alternatively a larger consolidation loan can be taken out, significantly reducing the monthly repayments. By freeing up more cash for repayments on the college loan, approval is more likely.

Another option to improving the credit score is to take out a student credit card several months before and make repayments on time. This establishes a good repayment habit and so getting a student loan become that bit easier.

Categories
Unsecured Loans

Unsecured Loans For Those With Bad Credit: Why Private Lenders Are So Popular

Traditional lenders, like banks, are often the first loan source that comes to mind, but in fact, there are a variety of alternative loan sources available. Private lenders provide options that can be more affordable and more effective than established institutions can come up with. So, when it comes to unsecured loans for those with bad credit, they are well worth considering.

Of course, as with all loans, securing approval from private lenders requires certain qualifications, though these can vary dramatically depending on which alternative lender is approached. What is certain is that approval is more likely to be given, even to bad credit borrowers.

The only thing that really matters is that the borrower has an ability to repay the unsecured loan granted. We provide a few examples of the best alternative loan sources out there, and how they can benefit your search for funds.

The Family Loan

This is arguably the most affordable option, as there is often no interest charged on a loan secured from a family member, or perhaps close friend. But the biggest advantage is that approval is guaranteed, making it ideal as an option for unsecured loans for those with bad credit.

There are only two conditions to this kind of deal. Firstly, the borrower needs to have a close family connection. And secondly, the family member has to have the sum requested to hand it over. But as the chances of approval from private lenders go, this is arguably the best option.

What is more, the pressure to repay the unsecured loan is much less from a family member than a lending institution that is trying to turn a profit. And, if there is any problem with the repayment schedule, a new one is easily negotiated. Also, to ensure clarity relating to the terms, write them down and have both parties to sign them.

The Company Loan

Another worthwhile alternative to a bank is your own employer. This might seem strange, but some companies are willing to grant loans, such as unsecured loan, for those with bad credit. The reason? It is a safe investment from the employer viewpoint.

Since the employer is the source of both the income and the loan, they can simply deduct the monthly repayment from each paycheck. This means that repayments are never missed. So, in terms of getting approval from private lenders, this option is pretty much guaranteed.

Keep in mind that employers often charge a small interest rate, allowing them to profit from the transaction – though, it is certainly lower than any bank would have charged. Also, like a family loan, getting an unsecured loan from your employer has no effect on your credit rating.

The Online Loan

Online lenders are one of the most popular alternative loan sources to traditional banks and credit unions. However, a private lender is not an online firm, but the relatively new phenomenon known as the loan bidding site. It is a prime source of unsecured loans for those with bad credit.

Basically, when someone is in need of a loan, they post a loan proposal on a website. Members of the site bid for the chance to part-finance the funds, and earn back a little through interest payments. When the borrower spots the bids that suit them best, they can accept the lenders and secure the funds.

Effectively, this system means that approval from private lenders is not needed. Instead, approval is provided by the borrower. There are conditions to meet too, such as providing information on income and credit history. These can be checked out by prospective lenders before they bid. But an unsecured loan can be attained quickly and affordably.

Categories
Student Loans

Why Undergraduate Private Student Loans Are A Smart Choice

Continuing your education after high school is no easy endeavor. The costs involved with going to college seem to rise every year. It is no surprise that many parents and students cannot afford to pay these fees out of pocket. This is the main driver for the increase in popularity of an undergraduate private student loan. This type of loan can help ensure that you cover the gap between federal financial aid and the rising cost of college tuition. To be specific, undergraduate private student loans are credit-based loans available to students to be used for tuition, room and board, supplies, computers and other related expenses. They are unsecured loans which mean that you can get a loan with no collateral required to ensure repayment. It’s a good idea to explore undergraduate private student loans as alternative sources of funding. Let’s discuss some of the benefits:

1. Speedy Application Process

The application process for an undergraduate student loan is usually fast and easy. There are many lenders which allow the application process to be completed online which means that not only will you find out your pre-approval status in minutes, but you can also manage your account from the internet as well.

2. No Application Fees or Deadlines.

You can receive funds for the total cost of your education if you so desire and you can hold off on repayments until after you graduate. This will relieve you from the added stress of having to worry about getting money to make repayments while in school.

3. Tax Benefits

Another advantage of undergraduate private student loans is that they have many of the same kinds of benefits as federal loans. You may find that your interest is tax-deductible which means more money in your pocket, but it’s best to confirm this with your tax advisor.

Despite these benefits, keep in mind that because undergraduate student loans are unsecured, this may also mean a higher interest rate. In most cases this may be the case, but don’t let that stop you from doing the research into finding a suitable loan. Similar to looking at options for any loan, you will need to shop around to find the best rate.

Overall, undergraduate private student loans are an excellent choice to bridge the gap when federal financial aid and scholarships aren’t enough to pay the tuition bills.

Categories
Student Loans

7 Steps of Consolidating Private Student Loans

Nowadays, education can be an expensive endeavor financially. Many students are getting financial aids to fund their college study. Although there are students getting scholarships, most students who don’t get the free money need to apply for private student loans to pay for their education. These private student loans may charge high interest rates and can be a financial burden to these students that don’t earn high enough income to repay the loan after their graduation. It is well worth for those who have taken multiple private student loans to look into the options available for consolidating their loans into low interest rate to get 2 benefits with one solution: ease of debt management and pay less in total interest with a loan at low interest rate. Here are the 7 steps of consolidating private student loans:

Step 1: List all the outstanding private student loans

Before finding for consolidation loans, you have to know the total amount you owe in the loans, the interest rate of each one and the monthly payment amount, etc. List them in the order from highest interest rate with largest amount to the lowest. Just in case you can’t find a consolidation loan to get rid of all accounts, paying off the amount owed with highest interest rate with larger amount will save you more interest.

Steps 2: Review the terms of each private student loan

Some student loans may cost expensive pre-payment penalties. Therefore, you have to review the terms of your current loans. Record down the penalties and the charges that will cost you if you settle them earlier than the terms specified in the agreements.

Steps 3: Clean up your credit report

Your credit rating will determine the interest rate, the amount and the chance for your loan application to be approved. Therefore, you need to make sure your credit status is up-to-date and no error found in your credit report. Before you apply a loan, get the credit reports from 3 common credit bureaus and review the report. If you have paid off a debt, but it is still listed as unpaid balance, it can significantly affect your credit score. You have to request any error found in your credit report to be corrected so that your credit score truly indicate your credit status.

Steps 4: Define the objectives of consolidation

What are your objectives of consolidating the private student loans? If your goal is to lock the loan at a fixed low interest rate and you own a home, you might want to consider a home equity loan. Or, the current total monthly payment cause a financial burden on you and you want to reduce the monthly payment. In this case, you will need to look for a loan that has repayment term that is long enough to reduce the amount that reaches your comfortable level. But, be aware that the longer you take to pay off a loan, the more interest you have to pay.

Steps 5: Decide on a consolidation loan

Once you know what you need in achieving the goals of consolidating private student loans, you can start look for a suitable loan from many offers in the market. Compare them in term of costs, interest rates and other benefits before deciding the one that meets your requirements.

Steps 6: Short-list and contact the lenders

After reviewing the offers that meet your objectives of consolidating private student loans, short-list a few of the best offers. Then, contact the lenders to get further details. You may negotiate to lower the interest rate when meet up the lenders. If you have credit history, they may agree to offer you with cheaper rate in order to secure you as their customer.

Steps 7: Sign up a consolidation loan

Once the loan is approved, review the fine-print of the agreement before accepting the loan. Then, use the loan to pay off the private student loans and make the monthly payment on time until it is paid off.

Categories
Student Loans

How to Apply for Private Student Loan

Private Loans

After you have taken advantage of all other available forms of

financial aid, such as grants or scholarships, you may need

supplement funding to cover the difference between your

education costs and expenses.

Private student loans are available from a variety of sources to

help cover the differences. These loans are not sponsored by

government agencies and are offered by banks or other financial

institutions so the interest rates can vary greatly. It is of your best interest to compare what is available to get the best possible loan. Investigation and research is the key. It is also wise to apply to a few different lenders at the same time. Each lender has their own credit qualification criteria. This can vary depending whether the borrower is a student or parent, or whether the loan is backed by a cosigner.

Find out if you will qualify for a private loan. Pre-approval

eliminates uncertainty up front and can save a lot of time as you

will know that you qualify and the amount you can expect to receive before you go through the full loan application process.

In some cases, you can find out if you qualify in less than 30 seconds.

Once you complete and submit your student loan application,

your school Financial Aid Office will certify your loan application and forward it to the Disbursing Agent for final approval, guarantee and disbursement. You will receive your loan funds at the beginning of each school terms.

Categories
Student Loans

Private Student Loan – Pros and Cons, Plus a Few Extra Tips

Thinking about getting a private student loan? These loans have some pros and cons, good points and bad points. Take a look below for the reasons for and against getting one of them to help you fund your college degree.

Also, at the end, you’ll find a few extra tips on how to pay for college and what to avoid.

Pros and Cons of Private Student Loans

1. Pro: Easy to Get

One of the reasons students like loans is that you can almost always find one. These loans come from banks and other lenders, and they don’t have the same deadlines that government loans have. That means that you can apply for one of these any time.

2. Con: Higher Interest Rates

When you get a private student loan, you will probably pay higher rates than if you got a Stafford or a Perkins loan, two loan programs sponsored by the government.

Private banks can charge any interest rate they want for student loans, while the government programs have a cap that they stay under, around 8%.

Bottom line: you will pay more to borrow money when you get a private loan instead of a government guaranteed loan.

3. Pro and Con: No Limit

The government has set up limits on student loans. Undergrads can only borrow so much, and then grad students more, and so on. A private student loan doesn’t have the same limits. You are only limited by your credit score and your lender – the bank.

This one resembles a double edged sword. You can borrow more, like a student I read about who borrowed over $120,000 on privates loans for a photography degree. But that’s a huge debt to pay back, with large payments.

The government limits try to keep you out of that situation with your degree. This one is big. Try to avoid going deep into debt to pay for your education. You will be better off with less debt of any kind.

4. Pro: Less Paperwork

It’s true: the private student loan will have a shorter form. The FAFSA can take some time to fill out to get a government student loan.

Usually, it’s worth the time. You will save on your student loan debt. And if you need a loan next year, the time to fill it our will be much less.

5. Con: Fewer Other Benefits – Like Deferment

Private loans usually don’t offer much in the way of deferment for job loss, low pay, while you find a job after college, or if you go back to college later. This feature can help you make those payments.

Private lenders just don’t give the same benefits because they cost serious money. And if they do, watch out. You might be making your loan much bigger on the back end. Some lenders will offer the benefits by increasing your loan amounts, sort of like interest on interest.

3 Extra Tips on Paying For College

  • Go to a cheap school. I know, your school produces huge salaries. But if your field has an average wage, you probably won’t be far off that salary when you graduate. Think about a less expensive school unless you have tons of scholarships.
  • How old are you? When you get to 24, get married, or if you have served in a war, you probably can apply for a Pell grant without your parents’ tax information on the FAFSA. Usually, poor students qualify for more than if you have to include your mom or dad’s income.
  • Share. This can save you thousands. Share a room. Share a car. And if you can, share your food purchases. It helps you avoid living on ramen all through your studies.
Categories
Student Loans

Private Student Loans Could Be The Life Preserver That Rescues Your College Education

It is common to hear college students griping about their financial problems today. Universities and campuses are offering high quality courses, but these courses usually cost a huge amount of money to take them. Often times, students resort to student loans and other means of earning extra money just to help them complete their studies.

Sometimes, the student loans that are granted by the federal government are not enough to cover the cost of one’s education. In this kind of situation, you will benefit greatly from having a high credit score. Why?

If you have a high credit score, you will not have much of a problem applying for a private loan. A private loan is another alternative for students that lack in their funds for college. Most student loans financed by the government are limited amounts, and private loans can help fill that gap.

Some students and parents turn to private loans because they need flexible options for repayment. If your parents are the ones applying for your student loan, they will likely apply for a private loan to be taken out by your parents because repayment of government loan programs can not be deferred.

Student loans granted by private lenders are dependent on the student’s major or course to be taken by the student. One of the prominent private student loan lenders is Citibank. Citibank offers the following loans to students: undergraduate loans, law/bar loan study, graduate loans, health and professions loans, and residency loans.

One important thing you need to remember about private student loans is that they cost more than government-funded student loans. But if you try to compare it with a credit card, it is still less expensive.

Currently the number of students choosing to get private student loans is rapidly growing compared to federal loan programs. If this situation continues, in just a decade, private student loans will exceed federal student loans.

Before you start considering a private student loan, make sure that you have already exhausted your federal student loan options. You should always try to measure things out, because in a few years from now, you will have to start repaying them.

If you’re looking at the interest rates charged by private lender, you should also look into the fees being charged. It is good to stick with this rule concerning interest rates and fees charged: an interest rate 1% higher is the same as 3% fees charged.

There are private student loans that have different terms of repayment according to their APR, so be careful when comparing such loans. The best loans for students by far are those which have low interest (at 2.8%) and charge you no fees. But this kind of loan is granted only to students having a co-signer who has a high credit rating. Hence, very few students qualify for this loan.

Private lenders will usually require students to submit a school certification which contains information regarding their specific education cost minus the financial aid that’s already been received. Most of the private lender does not disclose any information to students unless they file an application with them. This is because it usually prevents comparison between private student loan lenders.

Remember, it doesn’t matter if you already have a government-funded loan. A private student loan can still help you in your educational financial matters. And don’t forget that these loans don’t come free – that after you graduate and start your own career, you will have to re-pay these lenders.