Finishing college is a great experience but it does come with a burden. Simply put, the idea here is that you do need to try all you can in order to repay the student loans as fast as possible.
You can either have a positive or negative impact from the student loans, it all comes down to the approach that you have.
Paying back the loan
After you leave school you have up to 9 months that are seen as a grace period.
Afterwards you will need to start the repayment process and obviously it can be a very demanding process.
Just because you don’t get pressured into repaying the loan, it’s safe to say that the loan is always there.
You don’t have to acquire the money and repay it at the deadline, but most people do.
How does the student loan affect your credibility and credit?
The best way you can figure that out is simply by accessing a copy of the credit report.
Usually, there are 3 major agencies that will deliver this info such as Trans Union, Equifax and Experian.
Try to get a copy for each one.
These include all the information you need such as the current status, disbursement, balance due and so on.
Not all of these might have the same information, which is why you should try and get a report from each of them.
If you repay the loans on time then you don’t have to deal with any issue.
On the contrary, you will see that you will actually have the opportunity to establish a good credit history. That will offer you a great way to acquire new loans.
On the other hand, if you default your loan you will see that the credit will get affected.
What’s your current credit score?
Included in your credit report you can find a whole lot of info about the credit cards, student loans, car loans and other similar financial products.
This information can be used by the credit bureau in order to generate the credit score and this will show what type of credibility and repayment speed you have when compared to other customers.
Obviously, the lower credit scores show that you are not reliable whereas the higher scores will show that you are not a risky investment.
This means that high credit scores will offer you faster access to loans as well as a lower interest rate.
There are many factors that can lower or increase the credit score depending on the situations. Some of these factors are more important than others, while others not so much.
- New credit and how you manage it will obviously impact the credit score, not to mention the number of applications and inquiries you did will also affect the score as well
- The credit history, such as the length of time you had credit for, for how long the accounts were open and how often you used the accounts
- The debt you have, the account types you have and how many you have will also increase or lower the score. If the balances are close to the account limits the situation can be very bad.
- Payment history, such as how fast you repay the debts and if you have any non payment situations might also affect your score quite a bit.
Student loans and the credit score
It’s important to always repay the student loans as fast as you can. If you don’t do that then the credit score will be affected.
In case the credit bureaus we mentioned aren’t reporting your credit information, make sure that you talk with the lender so he can make the necessary revisions.
Another thing to keep in mind is the debt to income ratio. If you have a very large student loan then it will be really hard to receive new credits especially if you have to start with a low paying job.
On the other hand, in case the principal balances won’t change much or they do get larger you will see that lenders won’t really feel you get enough progress when it comes to repaying the debt.
How to deal with the student loan and remove it from your life?
There are multiple methods you can use in order to eliminate this debt and get it off your back. We created a list of suggestions that will help you deal with this problem as fast as possible!
- Try to repay the student loan as fast as you can. If you do that you will have a lower debt to income ratio. You will get access to better loans even if the income is not getting higher during the next few years or so.
- If you find it hard to repay the student loan you can ask for forbearance or deferring your loan. This way you will be able to do only interest only payments and your balance will remain the same. It’s not the best option but it can be helpful
- Try to talk with the lender and make him agree to a graduated repayment. This way you will have smaller payments in the first years and then these payments will gradually increase as you get access to better jobs. It’s a good idea to help you improve the debt to income ratio especially in the first few years.
- In case you find it hard to repay the student loan, try to check out the income sensitive options. This might extend the term of your loan but you will have less of a burden to deal with. You just have to take your time and figure out the right approach here, in the end it can be very helpful.
- Sometimes you have multiple student loans and if that’s the case you can try to consolidate them via a dedicated student loan consolidation program. It will make the total interest higher but then you do get to lower the debt to income ratio.
- Don’t ignore the student loans and never try to default them. They need to be dealt with as fast as possible because they won’t go away even if you are in bankruptcy. Talk with the lender and figure out if you can access loan rehabilitation programs as this will help you deal with the problem!