Poor_Credit_Student_Loans » Poor Credit
Poor Credit
If you are like most students, your education student loans are your first experience with borrowing money. If you have a poor credit, then it is important to learn how to manage your debt wisely, which in large part means making timely payments.
The record you establish for borrowing and repaying what you borrow is called your credit history.
A poor credit history will limit you in many ways :-
* A poor credit history increases the stress caused by unwisely managing your money.
* Having a poor credit history makes you payout more money as you have to borrow at a higher interest rates.
* Having a poor credit history diminishes your chances of success when you want to seek employment, rent an apartment or buy a car or home.
What is a credit report ?
Lenders and other finance providers do not keep track of your overall credit history; they rely on credit bureaus to do that.
When you apply for a car loan, for example, a lender will go to a credit bureau and request a copy of your credit report. They will utilize information contained in that report to help them decide whether to approve your application for a loan.
Your credit report shows:
* how much debt you have.
* if you have made your payments on time.
* if you did not pay back any of your loans.
What are the disadvantages of poor credit ?
A poor credit history increases the lender’s risk, hence you have to pay much higher interest rates for the same quantum of loan, as compared to someone with a good credit risk.
Why is timely repayment of your student loans critical for your financial future ?
If you borrow money to go to school, your education student loans could be the only credit you have on record. Most students have nothing on their credit reports but student loans and credit card debt. Because your credit history is an indication to lenders of the likelihood that you will pay back the money that you borrow:
* paying your student loans on time makes it easier to borrow again.
* paying your student loans on time makes it easier to obtain lower interest rates when you are ready to borrow again.
Should you anticipate having a problem making your payments in a timely manner, you should contact your lender immediately. Most lenders, will work with you to find solutions to avoid loan default.
Some of the solutions available include :
Deferment Your lender is required to temporarily postpone repayment of your loans in certain circumstances. Depending upon the type of loans that you defer, you may be able to postpone making both principal and interest payments on your loans, until your financial circumstances improve.
Forbearance If you need a temporary reprieve from making your payments, or simply need to lower your payment and do not qualify for deferment, your lender may opt to offer you forbearance.
Loan Consolidation If you would like to reduce your monthly payment amount or simplify your life through one combined payment for all of your loans each month, consolidating your loans may be the answer for you. Plus, you will have the opportunity to lock in today’s low interest rates. It is important to note that longer repayment terms result in more interest paid over the life of the loan. However, there are no prepayment penalties associated with Federal Consolidation Loans.
In conclusion, always monitor your credit history by managing your debt wisely. As a student, your only credit is your student loan. So always repay your loan on time to avoid a poor credit rating, which directly is going to have a major impact on your loan quantum borrowed, interest rate charged, your career and even when it comes to leasing a car !
Technorati Tags: credit, credit bureaus, credit history, credit rating, loan, poor credit