Don’t Let Your Student Loans Affect Your Future Credit

Jun 19, 2017 by

Don’t Let Your Student Loans Affect Your Future Credit

5 ways to keep your credit score high

If you pay attention to the news, you would be forgiven for thinking that student loans are holding an entire generation back from achieving their potential in business. Article after article decries the crushing debt that university graduates wake up to the day they leave college and join the workforce.

Although many of these articles are correct, they don’t paint a complete picture.

  • Yes, student loans are more prevalent today than they ever have been.
  • University costs and fees have risen at a rate that would make the greediest person swoon with envy.
  • Yes, the economy is struggling through an anemic recovery that makes it harder to pay back loans, especially when the job market is struggling.

However, and this is a big caveat, business owners have been dealing with the same problem of paying back loans garnered prior to actual cash flow for generations and it’s rare to find an article decrying the heinous practice of charging interest on business loans to entrepreneurs trying to start new businesses.

Apples to apples

Although it might seem like false logic to compare the two situations, the truth of the matter is that the parallels between college grads and business starters are myriad. In both situations, money must be invested in either a person’s education or a startup’s creation prior to achieving a positive cash flow. Similarly, if there is not a viable plan to pay back the investment, the person or business will suffer in the future.

For businesses, not having a plan to capitalize on sales to achieve a positive cash flow and payback the original loans will mean, simply, that the business won’t survive. No matter how clever or dedicated an owner, not paying back a loan makes your business a credit risk and unable to attract money in the future.

College grads have it a little different, of course. If you don’t payback your college loans you will not die, but your credit rating will, and in nearly all cases, that will make it difficult for you to prosper in later life.

Taking care of business

When it comes to paying back student loans, there several tips and tricks to make it a quick and – relatively – painless process.

  • Treat it like a mortgage. There are many advantages to paying your mortgage off early including freeing up a large amount of capital once the loan has been paid off. If possible, double your payments or make payments ahead to shorten the amount of time you will be paying.
  • Set a goal. Create a five-year plan to pay off your debts. Knowing how much time you have left makes it easier to budget money in order to pay off the loan quicker.
  • Don’t wait until you have graduated to start paying off your loan. Working a part-time job while in college can have benefits above giving you extra beer money. If you start paying off student loans as quickly as you create them, you will be able to pay them off quicker.
  • Avoid the instant gratification trap. We all want things, and we all want them now, but holding off on the high-dollar purchases can be a lot more effective in the long run.
  • Check out debt consolidation. If all else fails, understanding student loan consolidation can help you combine debts into one payment that can be easier to meet monthly.

Paying your debts will keep your credit rating high and, as proven by many successful businesses, starting in a financial hole doesn’t mean you are doomed to fail.

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Related post:   Ways to Repair Your Personal Credit File Before Going Into Business for Yourself

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