To tell you the truth, nobody loves taking student loans. However, sometimes, they are one necessary evil, which often becomes a sole option for students when they have to finance their college. However, when you take a student loan, you ought to be careful. So, here, we have come up with a few student loan mistakes that you should certainly avoid.
Do not lie in your application
Kaira, an expert homework help provider who offers online do my assignment service, says that one thing that she has learnt about student loans is that it is pointless to lie in your student loan application.
See, if you ever lie about anything in your application, there’s a 100% chance that you’ll get caught, and if you do get caught, you’ll face three problems. One, you’ll not get the loan, two, you’ll have to bear a fine towards it, and three, you might be charged for fraud, and sentenced to prison. So, just not worth it.
Only spend your money on the wants and not your needs
See, getting a student loan to pay for your education that will stay with you for life is certainly a great debt. However, using the loan money to pay for your useless needs, such as a new mobile phone, a play station, or clubbing and partying with your friends, is a horrendous debt.
Let’s just put it like this – A splurge, every once a month, is fine. However, there’s no way that you should put your future at stake for the pleasure of today. That’s a perfect example of disorganized money management. You ought to learn the difference between your wants and your needs.
So, when you are exhausting your funds from the loan, think of books and not booze, and tuition and parties. Dixon, an expert with TAE, says that while in college, he had an excess student loan, so he used the surplus and put it in a saving account that fetched him a high interest. It is a great strategy, and you can use it too. This surplus income from interest would help you pay your student loan faster.
Not choosing the right repayment plan
Well, it might be a little tempting to opt for a repayment plan, which has the minimum monthly payout, however, what you usually miss out here is that the plan with the lowest payout will have the longest term.
As a result of this, the total interest cost would also be high. Natasha, an online expert who works with FineGrades wherein you can pay for writing papers, says that she opted the income-based plan for the repayment of the student loan, and it worked out well for her. You can certainly use this as your repayment plan, and always pick the highest monthly amount that you can payout every month.
So, what is this amount? Few financial experts suggest that the monthly payout that you make every month shouldn’t be over 10% of the salary that you are getting. Try to increase the repayment amount, as and when your financial situation is any better.
Missing the due dates
A lot of students tend to miss out on their monthly due date. They think they can make up by paying double in the next month. Well, that’s certainly not how things will work.
Whenever you miss out on a payment, it would go as a black mark in your credit report and will have a deteriorating effect on your credit score. It does not matter whether you repay double in the next month or not.
Please know that this black mark can stay with you for years, and have a huge impact on your ability to get any other loan. If you ever think that the repayment schedule is higher than what you can bear, talk to the lender before you skip out on your payment.
Not considering refinancing
If there’s a drop in the market interest rate, you can immediately consider refinancing your loan. A particular interest rate, which was competitive back then, might be excessively high now.
Further, if you have taken multiple loans, you can get them consolidated. It will not only reduce your monthly payout but also lower the interest cost. Also, the rate of interest, as well as the terms of the loan, is differently set by different lenders.
So, do shop around, before you settle with any one lender. You can refinance your federal student loan to a private loan. However, that would also mean that you are letting go of the many benefits that come with student loans. Mia, a tutor who offers the best online digital marketing courses online, says that since she was unable to refinance the entire student loan, she decided to pay some surplus every month, and that reduced the span of her loan, as well as the cost of the loan.
Practically, the student loan is the first major expense that you’ll handle on your own. So, be careful about the listed mistakes and strictly avoid making them.