Paying Back Your Student Loans for Better Credit

These days its hard to get through college without having some kind of student loan. Many students also sign up for loans for the extra cash and don’t consider the long term repercussions of taking out such massive amounts of debt. Then once the students get out of school they may have difficulty getting a job, or the jobs that they do get aren’t always the most lucrative and well paying. This leaves new graduates with the dilemma of having to start paying back loans as early as six months after graduation, without always having the means to pay back those loans. When you get stuck in this situation it can be really difficult to get out of it and you can end up with a lot of problems!

If student loans are ignored for more than two hundred and seventy days then they automatically go into default. That means that the government can come in and garnish your wages, withhold income tax returns and apply the money to your balance due, charge extra interests and late fees as well as collection costs to your debt which can make it impossible to dig yourself out, deny you further student aid, and even sue! The worst part about getting trapped in student loan debt is the fact that student loans can’t be discharged in bankruptcy, and the government can continue collecting for your student loans for twenty five years!

So your best bet is to always make sure you keep managing your student loans instead of letting them slip. They can start to seriously add up and damage your credit score if you’re not careful! The most important thing to do when you want to pay off student loan debt is to make a plan and stick to it! As long as you are making regular payments you should be able to keep your credit score in line. Most important is that you stay the course and stick to the plan. It’s always best to pay more than the minimum payment if you can afford to, but paying more now and then not paying at all later can be just as devastating. Always pay off as much as you can afford to pay off!

There are four repayment options available for federal Stafford loans and each comes with their own pros and cons. The repayment terms can vary depending on your loans and your loan provider, as well as how much you owe and the terms of your loan when you signed. Recently the government changed the way they do student loans, so if you have any loans from the past year or so they will be handled by the federal government themselves and older loans are handled through an outside party. This is where variations in repayment can occur.

Standard repayment is just as it sounds, standard. In a standard repayment the borrower pays a set amount each month after graduation and that amount must be paid over a ten year period until the loans are paid off. With an extended repayment students will also have to pay a set amount each month but the amount of time that you have to pay those loans is extended. This way you can pay back lower monthly payments because you have a longer time to pay, but in the long run this method is much more costly. The longer you hold your loan the more interest you have to pay.

There is also the graduated repayment method, which seems to combine the best of both of the above payment methods. With graduated repayment you start out small and then by the end of your loan you make bigger and bigger payments. This can give you the benefits of small payments, especially when you are having difficulty finding work or finding well-paying work at the beginning of your career. Then as you become more established in your field and start making more then you can afford higher and higher payments. The only concern with this repayment method is that if you experience a job loss you will still be expected to pay off your loans, which could leave you with high monthly payments and no way to take care them. And that’s a recipe for disaster!

There is one other repayment method that can be good or bad depending on your own personal situation. This is called income-contingent repayment. With this type of payment students pay back an amount every month that is based on how much you earn every year. The government determines your payment amount by looking at your income taxes every year and then making your monthly payment a percentage of your monthly income. The only difficulties that can be faced with this method is that if you experience job loss at the beginning of a year, the government is still going to expect repayment based on last year’s taxes, which can find you being required to make monthly payments that you can’t possibly afford.

Whichever method you decide is right for you, the most important thing is that you do continue to repay your student loans. If you don’t it can be devastating to your credit score. Sometimes people think that if they can’t make more than they minimum payment they shouldn’t pay anything at all, but this idea can ruin your credit score! The less you pay per month then the more you will pay in the long run but anything is better than nothing because it can help you manage your credit score.

An honest auto loan provider will understand that life can get in the way of having good credit. They will want you to know that you can come to them and feel respected no matter what your credit situation is. And you should feel safe knowing that if there’s anything they can do to help you get an auto loan so you can start making monthly payments and getting your credit score back on track then they will do our best to make sure that happens!