Wednesday, January 16, 2019

education

As parents, you want the best for your children - and, with the growing reluctance of grown children to fly the nest, you might want to start planning to avoid the prospect of having your 35-year-old offspring cramping your retirement by still living at home. The time to start planning is now, by creating a savings plan to pay for your child's future education. 

According to government figures, by 2025 the average cost of a three-year degree course will have reached an eye-watering $50,000 - before you even consider living expenses. 

That means that most children starting out on their career paths will face the daunting prospect of having to pay off huge student loans before they can even think about starting to save for a home of their own. Putting saving strategies in place now to cover - or part cover their tertiary education will mean that once they start to earn, they can put their hard-earned cash towards the deposit of a property. Learning to save as opposed to earning to pay a debt is a much more uplifting experience and will get them off to a much more positive start in their career - and get them out of the family home sooner. 

Here is a little inspiration on the ways you can save...

Start Early: set up a bank account as soon as your child is born and set up a direct debit from your current account - however small an amount - to ensure a steady drip-feed of funds. Shop around for an account offering the best interest, and once a nest egg grows make use of long-term deposit accounts for higher interest rates. If you didn't do this and your children are older, don't be disheartened, start now. It is never too late to start saving!

Cash Not Trash: from the moment your child is born, it is showered with teddies, toys and other gifts from well-meaning friends and relatives. Most of these gifts end up in the trash or are given away as your child grows. Instead, encourage your family to give token gifts and to put money into your child's savings account. 

Piggy Bank: even though we live in an increasingly cashless society, we still all end up getting weighted down with loose change. You may not have a piggy bank, but find a sturdy receptacle and encourage the whole family to throw in their loose change. Cash it in at the bank every so often (you'll actually be amazed how much you amass in a short time) and put it straight into the savings account. 

Earn Their Keep: as your children get older, encourage them to start earning and saving their own money. Start by paying them pocket money to do small jobs around the home and then, once they are old enough, get them out earning at a weekend job. Teach them to save a fixed proportion of their income towards their education. Aside from contributing to the education fund, this practice will set them up for life with a savings ethic that will ensure that they continue to support themselves into a comfortable retirement of their work. 

Incentivise Saving: agree to match their savings dollar for dollar and see how quickly the funds mount up.

Help Them Get Entrepreneurial: set up an eBay account with your children and help them to sell some of their unwanted items online, then deposit the revenue straight into their bank account. 

 

credit

If you have ever applied for credit or a loan, you are likely to have a credit report. The information contained in this report is used by lenders to help decide whether or not you can afford a particular loan - and how likely you are to be able to repay the debt.

It is not uncommon to find yourself with a poor credit report based on mistakes and poor decisions you may have made in the past. Being rejected for finance when you've found the home of your dreams can be quite a blow - and the problem is exacerbated each time you apply for a loan as each rejection shows up on your credit score, making your chances of ever getting that loan even slimmer. 

But all is not necessarily lost - read on to explore the options open to you.

Is your credit report correct?

First of all, check that your credit score is correct. Don't assume that just because it's generated by a financial agency that there won't be any mistakes. There are cases where credit reports have been found to be incorrect, unfairly preventing applications from having their loans approved. Request a copy of your report and if you believe it is incorrect, you need to contact one of the agencies below with the correct or updated information. 

You are entitled to check your credit report for free once a year. Things to check are:

Are your personal details correct?

Is your address up to date?

Are any known debts incorrectly listed or duplicated?

Did you miss a loan repayment but not go 60 days in default?

Has your identity been stolen?

You can contact one of the credit reporting agencies for a copy of your credit report. At the time of writing this article, the agencies listed by ASIC* are:

Veda Advantage: veda.com.au - 1300 762 207

Dun and Bradstreet: dnb.com.au - 13 23 33

Tasmanian Collection Service: tascol.com.au - (03) 6213 5555

Experian: experian.com.au - 1300 783 684

The report is not good! What now?

Ok, so you've double checked your report. Everything is correct and it seems your credit report is poor. This does not necessarily mean you can't get approval for a home loan. There are still ways to find a lender who will approve that home loan and see you soon living in your own home. 

The human touch:

Look for a lender that doesn't just rely on credit scores. 

While most lenders use computer-based systems to determine whether or not to accept your application, with the debt servicing of the application not actually handled by a real person, there are a few lenders that will assess your application personally and apply a more human approach to the decision-making process. 

By having a real person evaluate your application, you have the chance to demonstrate that you have resolved any previous financial problems, which a computer program would not consider. 

Your mortgage broker can assist you in locating a lender in this instance and will be able to negotiate with them on your behalf to help obtain your loan.

Find a specialist lender

While most lenders will not approve an application with a bad credit report, there are some lenders out there that specialise in this field and who will accept the "risk". 

These specialist lenders are generally more agreeable to accepting the higher risk that accompanies clients with a poor credit rating. As you might expect, these lenders typically offer higher rates of interest, and/or other non-standard terms and conditions. But don't let this put you off as a short-term solution to securing your dream home. And remember that you credit score improved over time (and good credit behaviour), so once you have it back in a favourable position, you can refinance with a lender offering more preferable rates and terms. 

Just a word of caution though - beware which lenders you approach in this situation. Always seek the help of a mortgage broker to identify legitimate and appropriate lenders for you and avoid the pitfalls of so-called "loan sharks". And to avoid being tied into unfavourable terms and conditions that will be difficult or costly to get out of. 

 

 

Please note that this content is general in nature, does not constitute financial advice and must not be relied on when making a financial decision. Before making any decision, you should consult a reputable mortgage broker. 

Louisa Sanghera is a mortgage broker and is a credit representative (437236) of BLSSA Pty Ltd. ACN 117 651 760 Australian Credit Licence 391237.

https://www.moneysmart.gov.au/tools-and-resources/publications/factsheet-your-credit-report

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Contact Details

Zippy Finance 

PO Box 3078
North Turramurra
NSW 2074

T 1300 855 022 

Louisa Sanghera is a credit representative (437236) of BLSSA Pty Ltd ACN 117 651 760.  Australian Credit Licence 391237. ABN 85 168 278 975.

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