Category: General

Student Loans – Are They Really That Bad?

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There’s been a lot of talk about student loans lately, and they’ve become quite the controversial topic in some circles. And while many people look down on the idea and see it as something harmful that should ultimately be avoided, the reality is quite different from that. At least for those who know how to manage their finances, that is. The truth is that student loans have been specifically designed to maximize the benefits for both sides, and while they do have the potential to put you in a difficult financial situation in the long run, that mostly boils down to how well you plan ahead.

Many things should factor into your decision on whether or not to take out a student loan in the first place. This is something you should take an educated approach to. You can also see it as a good learning opportunity for managing debt in the future. Although, of course, you’d ideally not have to deal with any more loans after you’ve graduated and have entered the workforce.

Not All Degrees Are Equal

First of all, figure out what you want to study. Or, more importantly, figure out if the degree you want to pursue is actually a viable path worth taking out a loan for. The thing is, you need to know what your job prospects are before you even start studying. And while the job market is certainly quite variable and can be difficult to predict, there are some established trends that you can follow.

A STEM degree is often a good idea if you want something solid with a good degree of certainty for its future usefulness. However, if you don’t feel an inspiration for studying this type of material, you should not force yourself into it. Studying the wrong kind of degree just because of its potential future job prospects is a quick way to burn yourself out. And that’s before you’ve even gotten your first job!

Saving Money in Advance

You should also consider how you can help yourself on your own, without relying on your loan exclusively. Many students – or future students – underestimate their potential for earning some extra money to pad their income with. Just because you’ve taken out a student loan doesn’t mean that you should kick back and rely on that money exclusively. Quite on the contrary, now is a good time to figure out how you can earn some extra money on your own.

Consider taking an extra year off before you start university to gather up some extra cash as well. This can make a huge difference in the way you approach your studies and the kind of loan you take out. It can allow you to go for a smaller loan, which can have good implications on your future when it comes to repaying it later on.

Alternative Uses for the Extra Cash

Some people also try to come up with creative ideas for supplementing their income while they’re studying, and they use their student loans for that purpose occasionally. Keep in mind that this might be highly regulated and not available as an option though. You may have to report exactly what you’re doing with your money, and prove that it’s been going towards your studies and nothing else.

Starting a side business while you’re studying can definitely provide you with a great income boost if you play your cards right though. Not many students have what it takes to pull that off, but if you have a knack for running a business, it can be a very attractive option. It can also put you in a better position later on when it comes to repaying your debt, as you’ll have a financial foundation to stand on. Many students don’t have that when they graduate.

Have a Backup Plan

Know what you’re going to do if all else fails. It might sound simple, but it’s surprising how many young people are absolutely clueless about setting up a backup plan for their finances in case their degrees don’t work out. It doesn’t have to be anything grand, but you should definitely think of something that can keep you afloat in case you have to extend your studies, or have trouble finding a job after graduating.

In the end, student loans are not too different from most other types of loans. The fact that you can’t easily default on one shouldn’t scare you away. It’s still a good option for those with a responsible mindset and a plan for the future that seems feasible enough. If you can’t see yourself maintaining your payments on time and/or you don’t have enough motivation to follow through with your studies though, it might not be the most appropriate option for you.

How to Improve Your Credit Score

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Credit score plays a critical role in personal finances these days. It’s heavily integrated into many layers of society, and having a good score is a fundamental requirement for things like taking out loans and new credit cards. And yet, a surprising number of people are largely unaware of the implications their credit score has on their lives, and remain ignorant of the impact their actions have on it.

The result is that we see many people in difficult financial situations which, in many cases, could have been avoided by simply being more careful about maintaining one’s credit score at an appropriate level. There are several things to keep in mind when you want to ensure that you remain in good standing, and the reality is that a good credit score is within most people’s reach quite reasonably.

Pay on Time

By far the best thing you can do to improve your credit score is to ensure that you’re on time with all debt repayments. It doesn’t matter if it’s a small amount on a credit card, or a major loan for your house. You have to do your best to make every payment on time, and in full. If you can’t meet a deadline, let the creditor know in advance and ask them if you can work out a temporary alternative deal.

And if you do delay any payments, make sure to correct that as soon as possible. After that, pay attention to your credit score to ensure that the situation has actually been remedied. But more on that a bit later in this article.

Avoid Shifting Debt Around

Some people find themselves perpetually stuck in debt because they have unhealthy habits towards maintaining it. It’s not rare to see someone taking out a new loan just to cover an old one. As you can imagine, this strategy is not really viable in the long run, and can lead to many issues down the road. The biggest problem that most people rarely even think about though, is the impact this has on your credit score.

That’s because activities like this tend to look bad in the eyes of creditors. The way your credit score works takes this into account and can make it a bad idea to try repairing loans with other loans. Plus, any future creditors will be less likely to want to work with you if they have access to your credit history.

Be Careful with New Lines of Credit

Which brings us to our next point. New lines of credit should be considered very carefully before you go for that option. There are many implications this can have on your financial condition, but the most important one is how it affects your credit score. You’ll be hit by each incident where you take out a new loan, and even the act of verifying your credit history can have a negative impact. Unless you understand the implications on a very deep level, this is an option you should avoid.

This is linked to what we said above, but it should also be considered separately. Some people take out new lines of credit not because they need the money to fix an older problem, but simply because they can. When the option to get extra money is so easily available to you, you may eventually start looking at it as “free” money, and this is the fast track to financial ruin.

Verify Your Score Has Been Fixed

We already mentioned this briefly above, but it’s important to reiterate. Any time you’re involved in a situation where you’re fixing a past issue with your credit score, you have to see things through to the end. This means taking the extra step of verifying that the problems have actually been addressed. You’d be surprised how often it happens that a creditor forgets to update the appropriate institutions with your new status. And given the fact that you sometimes have to deal with statue of limitation issues, this can come back to bite you at the worst possible time.

While those problems are eventually fixable, this doesn’t mean that you should open yourself up to them in the first place. Preventing this from happening is as simple as checking in with your credit institutions to verify that the negative mark is no longer on your record. And if you do notice something wrong, don’t immediately jump on the offensive. Mistakes happen, and working with the other party in a calm-headed manner to fix them is often the best approach.

With some time and effort, you should develop appropriate habits for dealing with your credit score and keeping it in a good condition. It’s not rocket science, despite some people trying to convince you otherwise. And maintaining a good credit score will also teach you some healthy financial habits that are good to develop in any case.

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