Graduating from college and stepping into the corporate world is an exciting time. With big dreams in your eyes and a go-getter attitude, you aim to reach for the sky. You want to earn decent money and shower yourself with expensive gifts. However, for 73% of you, who took student loans, the story might be a little different. Student loans are a liability that can come in the way of living your desired lifestyle. Everyone wants to get done with them as soon as possible. The good news is that there are ways to repay your student loans faster and focus on other financial goals. Here is how you can go about it.
Utilize your grace period
Most student loans offer a six-month grace period so that you don’t have to start repaying the dues right off the bat. You can use this time to find a job if you still haven’t. It is also a good time to prepare a strategy for paying off the loan. The key is to prepare yourself mentally that money is going to be tight. Work out a budget around your student loan so that you don’t have to live paycheck to paycheck.
Know the details of your loans
If you have more than one student loan, it is a good idea to know all the loan details. Know whether your loan is a federal loan or a private one. Talk to your loan provider to know if the interest rate is fixed or variable along with the tenure and the monthly liability. This will help you in finding out the loan which is going to cost you the most. The best way to move forward is to repay this loan on priority and pay the minimum on the rest. It is also highly recommended to pay all your EMIs on time. This will ensure that you have a good credit score for any future credit requirements.
Make a plan for repayments
Student loans typically last from 10 to 25 years. The loan tenure and interest rate will decide the amount of EMIs you need to pay every month. By default, you may have been subscribed to the Standard 10-year Repayment Plan. Although it has the lowest interest rates, the monthly EMIs are on the higher side. If your income cannot support this, it is a good idea to revisit your loan plan and opt for another repayment plan, as required. Whatever you choose, it is advisable to pay more than the minimum. This will avoid you from hefty interest rates that compound to an exorbitant amount over the years. You can also put in your bonus, tax rebates or any windfall towards repaying your student loan.
If you have more than one loan or your interest rate is too high, you may consider debt consolidation. Try moving your loan to another bank if it is offering a lower interest rate. The bank may also agree to increase the tenure to further reduce your monthly burden. With this strategy, you will end up paying more interest rates in the long term. The choice is upon you to decide what suits you more, financially. Refinancing is another option that you can consider. To refinance is to take another loan to pay off your previous loan. However, you will need to have a good credit score to apply for this. It can become easier with a co-signer though.
Make your payments automatically
To avoid missing any installment, link your loan account with your checking account. Schedule automatic payments every month so that you don’t have to worry about missing the last dates. This will also help in building a good credit score. Moreover, many federal and private banks offer a reduction in interest rates if you choose to auto-pay your loans.
Consider loan forgiveness and reimbursements
If you have a job in public services, you can qualify for loan forgiveness. The program requires you to pay a certain number of payments and the rest are taken care of. If you work with a private organization, you may check with your company if you qualify for loan reimbursements.