HOW TO TACKLE YOUR STUDENT LOAN DEBT

Those four years you spent hovering over that three digit number (G.P.A) might have ended but before you pull the brakes, it might just be time to press gas, because here comes that other three digit number called your credit score.  For most students who financed their education via Student Loans, the completion of your degree has now awakened the ghost of the past and he isn’t Casper. Before you go running and screaming, here are a few tips you can use to attain good credit, using your student loans.

Tip 1)   Always make student loan payments on time - Making timely monthly payments prevents your credit score from taking several punches. If a payment is more than 30 days late, your credit score may spiral downwards.

Tip2)  Contemplate consolidation – For those who have several student loans, it is best to consider consolidating them through a student loan consolidation program.  Before you get all excited, note this won’t reduce your total debt, however a larger loan may offer a longer repayment term or a better interest rate. While you will pay more over a longer period, you will find that your monthly payments will be lower and in turn, so will your debt-to-income ratio. A high debt-to-income ratio caused by a lot of student loans makes it harder to qualify for other types of loans until those student loans are paid off. I am sure no one wants to buy their first home at 50.

Tip 3) Ask for a deferral - If the burden becomes too much for you to bear, asking for a deferral may temporarily solve your problem. A loan deferral is a temporary period during which time you do not have to pay the principal balance of your loan, but you might be required to pay the interest that accrues on your loan. For example, a loan valuing USD$10,000 that has a 5 per cent interest rate will require USD$41.67 to be paid each month. The good thing about a deferral is that it will appear current on your credit report and impacts your credit score similarly to making timely monthly payments.

This might seem like a never ending process, but taking these tips into consideration might push you closer to conquering that ghost and building good credit. After all, life is better with good credit.

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