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Should You Be Concerned About Your Credit If You Have Student Loans?

Todays Date: December 15, 2018

In today’s economy, many people are willing to go into debt for a college education, hoping for a brighter financial future. Unfortunately, student loans are not simple, and they often cause college students to graduate with a lot of debt. In most cases, upon graduation, the entry-level job that these college students start out working in does not make paying back the loan easy. Because of these circumstances, many people are worried about the affect that student loans have on their credit.

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.

One of the best ways to maintain a decent credit rating is to plan for dealing with the student loans now. Since your credit score evaluates your level or debt and payment history, a successful payment plan will not only lower your debt level, but it will also help establish consistent payment habits. In doing so, you will find that you can help your credit score even though you may feel that it initially was lowered upon graduation.

Also, for students who have not graduated college yet, consider making payments on your interest now rather than waiting until after graduation. Usually, the government allows students to wait until after graduation to begin paying their loan balances; though, interest adds up and you can get a head start by making payments while you are still in school. One reason for the problems with student loans is that people do not realize the amount they have to pay back. Interest adds up overtime, and then they graduate with a larger amount than they anticipated having to pay back.

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.

Just like most loans, student loans usually have a timeline that requires your payment in full – usually 10 years. Your monthly payment will be determined on this timeline, however, if you can afford to, it would be smart to pay more than the minimum payment. When you do this, you will obviously pay it off sooner, and you will also avoid paying more interest than you need to.

Just like any financial liability, it is definitely not wise to skip payments for your student loan, because it will affect your credit. Instead, a good idea is to contact your lender and try to negotiate a payment plan that works better for you. Most lenders are surprisingly nice to work with; and, if you contact them, they will most likely be willing to help you find a solution to your troubles rather then letting your skip payments. Talk with them if you find yourself overwhelmed, and demonstrate your willingness to act in good faith.

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.

For many a student loan is necessary and although it may be a tad risky for your credit, there are ways to safeguard your credit and pay off your student loans in the process. Responsibility is key. And, when you are paying them back, prioritize them so that your credit is protected.

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