Student Loan Debts - What Does This Mean For Your Credit?
The common mantra, "You get what you pay for" has lead many college students down the road to high levels of debt from student loans that will hopefully provide a brighter financial future for them. However, upon graduation, these students often find that they have such a high level of debt and an entry-level job that does not provide for paying the loans off anytime in the near future. The worry for many of these new graduates now focuses on their credit. After all, a high level of debt has never been great for one's credit score.
One of the most difficult parts about the road ahead might be your ability to obtain credit. There are many creditors out there who could be hesitant to loan you money or give you a credit card based on your high level of debt and your low initial salary. And, depending on what your past credit rating is already it could be all the more difficult.
Because you are a recent college graduate, you student loan debt is probably the largest debt that you have ever had, and this is one of the reasons it is going to effect your credit. Usually, we think of our credit rating in terms of our ability to pay back our liabilities, however, our credit rating also takes into consideration our level of debt. This is why your credit is going to be affected when you graduate and your student loans are high.
If you do intend to take out student loans or you already have them, you should consider determining a plan for paying them off now. A successful payment plan will be instrumental in helping your credit score, especially since your credit score involves the level of debt and your payment history. When you establish a payment plan, you will help yourself financially by promoting healthy financial habits that will only further help your credit score and your financial life in the future.
For those students out there who have not graduated yet, a great idea to help with the situation is to begin making interest payments now. Although in most circumstances, the government allows you to defer interest payments until after graduation, you might find yourself in a better situation financially if you can begin to pay the interest. One of the reasons that student loans creates such a problem for people is because the interest adds up so quickly, causing most students to graduate with more debt than they anticipated.
One of the nice perks about student loans is that they give you a grace period after graduation, allowing you approximately 6 to 12 months to begin the repayment process. This grace period enables you to find a job and get on your feet financially before you begin making payments. Many people actually find employment before their grace period ends, and if they do it is a good idea to set aside money to use towards your beginning payment. This way, they can start off with a decent payment amount, and hopefully continue making consistent payments in the future.
After your grace period, you typically have a 10-year period to pay off your student loan. The amount you owe each month will be determined by this timeline; however, you can always and should if possible pay more than the minimum amount due. When you pay more than the minimum amount due, you will obviously pay the balance off faster and you will also pay less interest.
When it comes to payments, be sure not to skip payments due to financial difficulties or payments that seem too high. Try an alternative and consider contacting the creditor to negotiate a payment plan that you can actually pay. The lenders are usually great to work with and they are known for their willingness to help people avoid payment problems. Talk to them if your situation requires their help.
The most important thing you need to remember in regards to your student loans and your credit is to NEVER default - NEVER. When you default on your student loan, it could stay on your credit record for approximately seven years. And, if you take too long to pay it back or neglect it, you could be involved in a legal battle. In addition, your lender might have the power to garnish your wages and eliminate your tax refunds.
Even though student loans cause debt and may be difficult on your credit, they do provide education. If you have to take out student loans, just make sure you are responsible and make every effort to pay them back quickly and on time.
One of the most difficult parts about the road ahead might be your ability to obtain credit. There are many creditors out there who could be hesitant to loan you money or give you a credit card based on your high level of debt and your low initial salary. And, depending on what your past credit rating is already it could be all the more difficult.
Because you are a recent college graduate, you student loan debt is probably the largest debt that you have ever had, and this is one of the reasons it is going to effect your credit. Usually, we think of our credit rating in terms of our ability to pay back our liabilities, however, our credit rating also takes into consideration our level of debt. This is why your credit is going to be affected when you graduate and your student loans are high.
If you do intend to take out student loans or you already have them, you should consider determining a plan for paying them off now. A successful payment plan will be instrumental in helping your credit score, especially since your credit score involves the level of debt and your payment history. When you establish a payment plan, you will help yourself financially by promoting healthy financial habits that will only further help your credit score and your financial life in the future.
For those students out there who have not graduated yet, a great idea to help with the situation is to begin making interest payments now. Although in most circumstances, the government allows you to defer interest payments until after graduation, you might find yourself in a better situation financially if you can begin to pay the interest. One of the reasons that student loans creates such a problem for people is because the interest adds up so quickly, causing most students to graduate with more debt than they anticipated.
One of the nice perks about student loans is that they give you a grace period after graduation, allowing you approximately 6 to 12 months to begin the repayment process. This grace period enables you to find a job and get on your feet financially before you begin making payments. Many people actually find employment before their grace period ends, and if they do it is a good idea to set aside money to use towards your beginning payment. This way, they can start off with a decent payment amount, and hopefully continue making consistent payments in the future.
After your grace period, you typically have a 10-year period to pay off your student loan. The amount you owe each month will be determined by this timeline; however, you can always and should if possible pay more than the minimum amount due. When you pay more than the minimum amount due, you will obviously pay the balance off faster and you will also pay less interest.
When it comes to payments, be sure not to skip payments due to financial difficulties or payments that seem too high. Try an alternative and consider contacting the creditor to negotiate a payment plan that you can actually pay. The lenders are usually great to work with and they are known for their willingness to help people avoid payment problems. Talk to them if your situation requires their help.
The most important thing you need to remember in regards to your student loans and your credit is to NEVER default - NEVER. When you default on your student loan, it could stay on your credit record for approximately seven years. And, if you take too long to pay it back or neglect it, you could be involved in a legal battle. In addition, your lender might have the power to garnish your wages and eliminate your tax refunds.
Even though student loans cause debt and may be difficult on your credit, they do provide education. If you have to take out student loans, just make sure you are responsible and make every effort to pay them back quickly and on time.