This Is How You Can Clear Your Student Debt
If you’re a student just out of college, you’re no doubt going to be in some sort of debt. And that too, your debt would mostly be a collection of various debts you’ve had to incur to keep yourself afloat. After all, you have to do something in order to be able to pay the bills, maintain a car, rent an apartment and pay for your tuition. The best option is for a student to consolidate all his or her loans into one. This is done by taking on another loan, which amounts to enough money to be able to pay off all your loans. The advantage is glaring. What this allows you is the comfort and clarity that dealing with only one loan lends to you.
All your loans are combined into one big loan that you’ve now got to worry about. But this is always better than having to deal with several different creditors, all of whom offered you different interest rates and varying terms and conditions. Usually the interest rates on all your previous loans are combined and then averaged to determine your rate of interest. As a result the interest rate you are offered will be lower than what you had earlier. Dealing with just one loan means that you now have a good idea of how to go about budgeting your finances. It is easy to see why handling one loan is better than handling many. You just have to worry about writing one check per month. As long as you stay on track and are punctual with your payments, debt consolidation should definitely work out for you.
Students are often advised to pay off the loans with the highest interest rates first. Although this is good advice, when it comes to repaying student loans it may not be a good idea. This is because student loans often have the lowest interest rates, but is the most important debt to clear. This is because failure to clear your student loan will not reflect well on you when your credit history is looked at later on. Your student loan can default if you miss consecutive monthly payments. Although there are various ways in which you can get your credit back on track, once you have a defaulted student loan appear as part of your credit history, you will always be looked at as a risk when applying for things like a car loan or a mortgage.
It is a good idea to consolidate your student loan when yet in the grace period that you’re allowed. This is because it’ll give you a clean start and so you’ll know how to go about your finances, and also because you’d be able to take advantage of low interest rates since the rates tend to increase in July
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Just one thing married folk might like to be mindful of when consolidating debt — in the event of your demise, your spouse has only to present your death certificate to have the student loan(s) forgiven. In other words, if you die, the money does not have to be paid back. But if you include your student loans in that consolidation, the deal is off, and your spouse will be stuck with this huge, albeit consolidated!, loan payment. Something to think about. These days, student loan money is about the cheapest you can get, so it might be worthwhile to consolidate the other debt and write TWO checks – the consolidation loan and the student loan.
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Comment by Pam — November 1, 2007 @ 9:14 pm