Graduation has come and gone! You're Settled in your career and your ready to buy a home but there may be something from your co-ed days holding you back: Your Student Loans. There are a lot of myths an miseducation about how student loans really affect your credit and if you dont seek the correct information, you could find yourself missing out on the home of your dreams because your credit may not be as great as you thought. Here are a few myths that may trip you up and the realities that will help you get back in the game!
1. You don’t need to worry about paying student loans
Most often we take out loans blindly usually out of desperation without even thinking of how they will affect our future plans. We also usually take them out under the mindset that they are good credit. While this may be somewhat true, you still will be responsible for paying them back. Period. To avoid living like a struggling college student now that graduation has arrived, be sure to stay ahead by living within your means and setting up a manageable payment plan as soon as you are in the position to start repayment. If you're in a financial strain, don't ignore them. Contact your loan provider and work out an arrangement to avoid delinquincy and wage garnishment.
2. Income-based repayment plans won’t affect your credit
Income-based repayment (IBR) plans are usually a favorable option for lowering your monthly student loan payments. They give borrowers a chance to better manage their student loans by applying for new repayment plans based on income and family size.
Although an IBR plan helps reduce your monthly payments, you’ll still be charged an interest rate depending on your credit and approval for the plan. Plan on making regular payments that are enough to cover the interest charges. Otherwise, you’ll end up going further into debt.
What’s more, taking on more debt while not paying off your current debt load can negatively impact your credit score. A high debt-to-income ratio can cause your credit score to decrease and prevent you from applying for other loans, or receiving better interest rates.
3.Student loan refinancing is always beneficial
Student loan refinancing is the hot new thing right now. While it may make sense for private loans, be careful with your Federal loans. When you refinance your Federal student loans, you convert them into private student loans. This means the income repayment plans and forgiveness options that are available for Federal loans disappears.
Additionally, your student loans will not be forgiven upon death (unless these terms are specifically in your private loan terms); you will need to get life insurance to cover your loans so you don’t pass them on if something happens to you.
4. If you have several student loans, you should consolidate them
You shouldn’t think of student loan consolidation as a tool to take several loans and combine them into one for the sole purpose of making monthly payments easier. Instead, you should think of consolidation as a tool to lower your interest rate — if it makes sense. If you think about consolidation in the former way, you may find yourself paying more than you otherwise would have.
The servicer will use the weighted average of your loans and round up. This could leave you paying more over time. You should also be careful with consolidating your student loans because you may lose some of the beneficial terms if you consolidate.
Read more at: https://www.moneyunder30.com/dont-fall-for-these-8-myths-about-student-loans
5. Student loan payments will be with you until you retire
For most student loan borrowers, the amount of their debt can be overwhelming and stressful. It may seem like you’ll never be able to work your way out of debt, or you’ll be close to retiring before you make your final payment.
Don’t despair! While that mountain of debt you have after graduating college may seem insurmountable, you have options. Some of these options include IBR plans, refinancing, and debt consolidation.
For example, this couple in their early thirties paid off over $80,000 of student loan debt by teaming up together and working hard at it for 3 years. And even if you have hundreds of thousands of dollars of student loan debt, don’t get discouraged. Blake was able to pay off $380,000 of debt in 21 months and is now a successful dentist.
To pay off your student loans faster, consider taking on overtime at your day job, starting a business on the side or working odd jobs on the weekend. This will help you out more funds towards your student loan debt.
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