does a student loan affect your credit?
joe has one student loan which helps to pay his college fee. apart from student loan he also has credit card . joe wants to know if taking up a bank loan to pay off student loan is a good idea or not , also does having too much student loan to pay will affect his credit ?
tip:
first of all student loans are a kind of loan. Considering this, we can say student loan will affect credit just like any other loan but here is the full synopsis :
1. if joe has student loan and he is keeping the bank informed about payments and graduation dates etc , it will not affect his credits.
2. If joe starts making late payments or not paying at all , banks take this into account and then it starts to hurt his credit.
so joe should be fine as long he pays installments on time and keeps in touch with the bank.
joe can also opt for secured card which helps better his credit.
But most of the time student loan policies are such that what joe might be paying is not enough to cover the entire installment as it involves paying up for interest . in this case the amount juts piles up and it becomes near impossible to pay off entire debt and this sometimes starts affecting joe`s concentration on studies and on GPA . one should beware about these kind of policies and make sure to make an advance payback plan and calculate exactly how much and when, the amount needs to be paid.
some people also open multiple accounts at multiple banks, normally these are secured accounts. they use these accounts for daily expenses and keep payments up to date . after a while they close these account one by one until only single account is left . closing account gives them money back , finally the single account that was left would return the deposit after fixed time and greatly improve credits as much as 2 times. this might be little tricky for most people, but it is the method which works when you do not have other options.
the bottom line is that, one needs to pay off student loan on a timely basis as one can defer payment but not the interest which keeps on increasing. so paying banks on time and then figuring out way to improve credit is the right way to go.
will consolidating student loan with a personal loan lower interest?
joe had some student loans which he consolidated some times back into a single loan. Now joe wants to pay off this loan which has high rate of interest by taking a personal loan so that interest amount keeps low. will this work ?
tip:
The trouble with this approach is that even if joe pays off his consolidated student loan with a personal loan from a bank, he will have a personal loan to take care of.This personal loan will be non deductible which is not very great either.
joe could try to contact the loan provider bank to lower the interest or use another company and consolidate his student loan on a lower rate.
cheers!!
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