When it comes to student loans, sorting out facts from the stories is indeed very intimidating. It is simply because there are innumerable contradictory information available online. Sorting the best facts from the available information is indeed a difficult task.
This post aims to debunk some myths related to student loans. This will help millions of parents and students looking forward to getting loans to deal with the education as well as the personal finance of the aspirants.
- Student Loans Decrease the Credit Score
The payment history is an integral part of the credit score. Your student loans will increase your credit score if you can make consistent payments. Doing so also proves to the lenders that you are a responsible borrower. A high credit score helps you achieve better rates on personal loans, mortgages, and auto loans.
- Nationalised and Private Student Loans are the Same
Private loans do not have the same perks and borrower protections as nationalised ones. You become eligible for extra repayment choices and forgiveness programs with nationalised loans. Unlike unsubsidized and direct subsidized loans, private loans need a credit check. You can enjoy lower rates and get the opportunity to opt for variable loans. That’s amazing.
- Lower Interest Rates are Always Beneficial
While the interest rate is an important determining factor, it must never be an end-all-be-all. It will also help to keep the loan’s term duration and repayment options in mind. The former impacts how much you have to pay each month. The latter could range from paying the entire balance before graduating high school to deferred payments.
- Consolidating Student Loans and Refinancing are the Same
Debt management experts suggest that consolidation means combining several loans. On the other hand, refinancing means restructuring the current loans and getting a new loan with updated terms. You can consolidate nationalised loans only. You can refinance both nationalised and private loans. Consolidation might not provide you with a better rate, but refinancing does.
- Stop Paying Loans Until You are Financially Stable
When financially unstable, the only way out is to stop making payments. This hampers the credit score. Instead, contact the federal loan provider and see if you can request an income-driven repayment program. These programs evaluate your earnings and family size while calculating monthly payments. Based on one’s situation, the payment can be as low as $1 per month.
You may also opt for loan forbearance for financial problems, medical expenditures, and unemployment reasons. General forbearances last for a year. Remember, the interest will continue accumulating during the forbearance period.
- Saving and Paying Off Student Loans At the Same Time is Impossible
You can create a budget that accommodates all of your financial priorities. Set aside a portion of your income toward the loan payments and some toward the savings account. Are you eligible for the income-driven repayment program?
If yes, you are free to make small payments each month. This leaves behind enough cash to save. You do not have to keep hundreds of dollars to accomplish your savings goals. Even $5 is a start.
Knowing the honey-trapped myths above helps you understand student loans better. You can now arrive at the best decision possible regarding your student debt. The best way to deal with this problem is to avail lower interest rates for HDFC bank personal loans to deal with all financial constraints. Get in touch with professionals to get the best quotation for loans. Have more doubts and questions? Well then, please get in touch with an experienced financial consultant.