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So you just graduated from college and have got your first job. It is now a month before the various loan companies send you statements in the post telling you that you have to start paying back student loans next month. How will you manage? You have to buy Xmas presents, treat yourself to that little extra drink or two and buy those things you REALLY need. Here is how its done:
Periods of Grace
Many graduates choose the option to defer their loans for a six month period. That is typically how long the grace period is for student loans. It may be advisable to take advantage of this option if it has taken you a while to find a job or if you are starting out on a low wage. However, if you do have a decent job with a great salary, or if your loan amount is not ridiculously high, it may be good to start paying right away because the sooner you pay off your student loan, the easier it would be for you to buy a house and save money for the future. Remember, you will have to pay off your student loan eventually, so the longer you prolong it, the more it will cost you in added interest charges.
Duration of Loans
In the UK student loan repayments are usually based over a ten year period. Obviously, the shorter the length of the loan; lenders have less of an opportunity to change your interest rates. Many lenders will give you the option of extending your loan repayment duration. Students with £25,000 or more in student loans may opt to increase their payment period to 30 years. Its all common sense really in so far as the shorter the payment period of the less money you will spend on interest.
Loan Consolidation
If you have more than 3 different lenders like most students, it is definitely in your best interest to consolidate them into one loan and one easy payment. The reason for this is that you can have one loan with a locked low interest rate. Most consolidated loans have an interest rate of five percent or less. So instead of paying three different payments with different higher interest rates, it is best to have one lower fixed rate loan. It also makes payment much easier to manage.
Your student loans are a financial commitment which will affect your credit history and influence your credit scoring. With this in mind, be responsible, pay off the debts and preferably pay them off sooner rather than lateras this will save thousands of pounds in interest. The money you save could be the initial deposit on your first home.
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Loan Advice