According to the US Treasury Department, Americans today owe more on their college loans than they owe on their credit cards. Because of this, many people are questioning whether college loans will become as burdensome to American families as credit card debt has. Of course, this means that it is important for anyone with student loan debt to get it paid off as quickly as possible.
Unlike other debt, loan debt cannot be discharged during a bankruptcy. It is also rare to be able to defer loan payments for an extended period of time or have the total amount of debt reduced or forgiven. Furthermore, if a former student goes into default on his or her loans, a loan company is allowed to garnish wages, tax refunds, and Social Security checks in order to get their money back. Therefore, it is critical that people who have student loans do whatever they can to insure that they are paid off quickly.
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The best way to get your student loans paid off quicker is to make extra payments towards them every month. While some people may find this difficult to do at first, there are many advantages to making it a financial priority to pay off student loans.
To start, many college loans, especially private loans, have high interest rates. A typical private student loan today will have rates between seven and nine percent. When compared to the average four percent rate on a 30-year mortgage or the average three percent rate on a new car loan, student loan debt is probably among the highest interest rate debt that an American family carries. By paying it off quickly, an individual or family will pay less in interest over their lifetime than an individual or family that chooses to prioritize other debt.
Furthermore, loans are often the first type of debt that a person acquires in their life. By making sure it gets paid on time every month, many people see their credit score improve. Paying the loan off completely will often drastically lower the total amount of credit being used by a person, helping their credit score improve even more.
Paying off school loan debt will also help an individual when they apply for other loans. Having a high remaining balance on prior school loans is one of the main reasons why students get rejected for additional funding. People who are considering getting an advanced degree and/or going back to school should seriously consider lowering their existing student loan balances as much as possible.
Paying of school loans will also improve a person's credit to income ratio. This ratio is often used by banks to determine how much a person qualifies for in the way of new loans. Anyone who is applying for a mortgage or even a car loan is advised to pay as much as possible towards their student loans.
Finally, people who are able to pay more towards their loans will see a lower total balance. This will help if and when a person decides to refinance their school loans.
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