Every one faces a situation in life where a decision has to be taken that requires financial resources that are beyond the means of the individual taking the decision and in such a situation people turn towards institutions that offer loans. Mostly people turn to banks but there are other institutions as well, such as the government or P2P lending platforms.
Government funds and loans are some of the most accessible form of funds available today however government funds and loan programs carry certain pre conditions and pre requisites. It is important to be aware of the funds and loans which the government offers to the people because these are available at terms which are easier than those of private sector lending institutions.
So let us have a look at some of the loan programs of the United States government.
People looking to buy a loan, have the option of Federal Housing Association loans. FHA loans are the most widely used housing finance loans in the U.S. Most people looking to finance the purchase of their home take out FHA loans because compared to loans from a bank or a home mortgage FHA loans are cheaper. FHA loans are a government backed house mortgage issued by a FHA approved lender. FHA loans provide up to 96.5% financing through mortgage and have just 3.5% down payment. FHA loans are designed and ideal for low to middle income earners. Although FHA loans are processed by financial institutions or private sector mortgage lenders but they are overseen by the government, the private sector institutions only act as facilitators.
For the members of the armed forces, their families and veterans there is an option of taking out VA loans which have been set up by the United States Department of Veteran Affairs. A VA loan is basically a mortgage loan. VA loans are subsidized by the government and offer a very low rate of interest with no requirement of down payment. VA loans are processed in a manner similar to FHA loans.
Home Improvement and Repair Loans
For people who already own a home, there is a financing option for when home improvement, remodeling and repair are required. The FHA 203(k) loan is a type of government backed mortgaged offered by the government for home purchase and home repairs, maintenance and improvement. Basically this program is aimed at low to moderate income earning families, they are encouraged to buy house that are in dire need of repairs and thus the loan allows people to buy old properties and renovate them.
If you need to make major changes and additions to your home to make it energy efficient or to install renewable energy equipment to make your home energy efficient then you can apply for a Property Assessed Clean Energy (PACE) loan through your state government. PACE loan for seismic retrofittingfor homes located in earthquake-prone areas; for hurricane preparedness measures; for installation of solar panels or boilers; for energy-efficient roofing; and LED lighting upgrades.
There is no down payment on PACE loans and the property serves as collateral for the loan and instead of monthly repayments, the loan is paid back through addition to property tax.
Business owners can apply for a Small Business Administration SBA7(a) loan from the government, this loan is typically given to small businesses that qualify certain requirements such as ability to generate profits and the reasoning for funding. This loan allows business owners to obtain financing up to $2 million. The loan is processed in a manner similar to FHA loans, it is overseen by the government but processed by private sector institutions.
Students rank highest in the order of individual who apply for loans, they are seen as a priority by the government because the educational needs of the students cannot be compromised. Stafford loans are one of the most common and easily available student loans. They do not carry tough income requirements and can easily be obtained by graduate and under graduates. The loan carries a low rate of interest and the payment can also be deferred for up to six months after graduation.
A Parent Loan for Undergraduate Student (PLUS) loan or a Direct PLUS loan is a loan available to parents of dependent students or professional under graduate students for higher studies. To benefit from this loan the student must be enrolled a school that takes part in the FDS loan program. The funds are given to the school, which applies it first to major expenses such as tuition, books etc and then the remainder is disbursed to the parents or the students, as the matter may be. The loan carries fixed interest.
This is another category of loan available to students; Perkins loans are not as common as Stafford loans because they carry tough conditions and are not easy to qualify for. The tough conditions and requirements mean that the loan is cheaper than Stafford loans and it is subsidized by the government. It carries an interest rate of only 5% and the interest will be paid by the government till the student graduates and takes over the repayment.
The limit of funds available is capped each year and depends on the stage of schooling of the student.
The government does not offer personal loans, for personal loans people have to turn toward private sector banking and financing institutions. The government only offers funding and assistance for education, housing and business purpose.