Today, tuition costs have increased and often put higher education out of the reach of a lot of people. But if you know how to handle your student loan the best possible way, it can benefit you. But can a student loan affect your credit score? Student loans are generally considered to be ‘good’ type of credit and having one on your report will help you to get a solid FICO score quickly, as long as you make your payments on time.
Your credit ratings reflect your debts, which means that if you make your loan payments before the due date, you will most definitely establish a good credit history. If you make good financial planning, you’ll be able to pay them on time and you won’t have to stress out about your debts.
Make interest payments
If you have obtained a bank loan, you may need to make interest payments while you are still attending classes at school. But if you develop a habit of making your student loan interest payments before graduation, it will help you remain on track in order to pay your loans. For example, you can choose your own repayment schedule, that really works for you.
Even though you may have the option to defer these interest payments, it would be best for you to try to avoid this option. Keep in mind also that the longer your student loan payments are late, the lower your credit score falls, until it reaches the ‘poor’ category. But if you pay early on your interest, you’ll feel more relaxed and able to concentrate on your studies.
Take advantage of the grace period
A grace period is defined as the time during which you are not expected to make any payments on your student loans right away. Upon graduation, in most cases you have a 6-12 months grace period before you have to start repaying your loan.
In fact, this ‘waiting period’ can help you find a job and that will give you some financial stability. In case you find a job before your grace period is up, it’s better for you to try to save some money and make a large payment to your loan. This will enable to start off on the right basis.
Pay your student loan as soon as possible
Even though the students loans give you up to 10 years to repay, it’s better for you to try to repay it as soon as possible. For example, you can increase -if you can- your monthly payment. By doing so you will reduce your debt faster and will lower your total interest you pay over the life of your loan.
Never miss a payment
If you are having any difficulties on repaying your loans, you should contact your lender. Usually lenders will cooperate with you and they will try to find the best solution. For example, they can arrange for you to make an alternative repayment plan, that would fit you best and you may be also able to defer payments for a few months. Keep in mind though that your loan may continue to accrue interest.
Don’t try to default
This could actually leave you with a bad credit history. In this case collectors will be after you for loan payments and in some cases they may even take legal actions. You need to be very careful, because even though you may declare bankruptcy, your student loan might not be forgiven and there are certain loans, like government ones, that you will still have to repay them.
Sourced from: LENDING TREE
Photo: Thinkstock/SIphotography
