Best Practices for Taking out Student Loans

By Danielle Wirsansky on June 22, 2017

It is something that all students attempt to avoid, but often enough, cannot be avoided — the dreaded student loan, which haunts a student’s life and dreams until it is paid back. Student loans are a regrettable part of the college experience but often necessary in order for a student to get the kind of education they both want and need in order to succeed at their dreams.

But despite how common it is for students to get a student loan, caution should still be taken if you are interested in or need one. You should still use your common sense when moving forward with such a big commitment and debt as a student loan. Read on to learn some of the best practices for taking out student loans!

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Compare Offers

Just because you need a student loan does not mean that you should just accept the first loan that is offered to you. There are many options out there for you to get your loan and you want to be sure that you are getting what you need from the deal.

Are you getting the correct amount of money necessary to go to school and survive? A loan too small can still be helpful, but what is the point of getting one too small when you may be eligible for a loan that covers the full amount that you need? You also need to know how much the interest is. You might be offered a loan for the amount you need from one place but with outrageous interest! And unless you investigate and find other loan options out there, you might never have realized that there was another bank willing to make you a loan for the same amount with a much more reasonable interest rate.

By shopping around and comparing offers, you can be sure that you are not being taken advantage of and are making the most of your situation. Even if you have to go into debt, going into as little debt as possible can be very helpful and uplifting.

Take What You Need

Going into debt is not a pleasant thing and nor should it be something that you as a student do lightly. Debt is hard to pay off and comes with a price including stress and interest rates. If you need to take out a student loan though, then you need to take out a student loan. However, you should be sure that you are taking out a loan that is just the amount that you need, not more or less.

As we discussed earlier, taking out a loan that is too small may help but seems unnecessary — you will just end up having to take out a second loan which will be hard to do when you already have one loan out. A bank will be hesitant to allow you to take on more debt before paying off what you already owe. This just gets you stuck in a tough situation.

You also do not want to take out a loan that is too big. It will just increase the amount of money that you will have to pay back to the bank. The larger the loan, the more interest you will be required to pay on it and interest can quickly add up. Why make yourself pay interest on an extra thousand dollars that you did not truly need from your loan? You just lose money in the long run.

Instead, be very careful when calculating how much money you need before applying for loans so you get the actual amount that you need, without undercutting and putting yourself at risk or taking too much and being unable to pay it in time.

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Understand Your Agreement

You might know that you need a student loan. You might even find a loan that looks like it will cover your needs. But before you accept it, you need to make sure that you absolutely and 100 percent understand what your agreement entails before you sign your name to any legally binding document.

Of course, you need to know the amount of the loan that you are taking out. But you also need to be sure that you know the interest rate, what your monthly payment amount is, the date you need to pay each installment by, and more. It can all be hard to understand and discern from scanning a contract so it is better to have the person handling your loan lay it all out for you so you can competently handle your own loan.

You do not want to end up missing a payment and being charged more money because you did not know when the payment was due or being unable to pay back your loan because you did not understand the magnitude of the payments you would have to make each month and cannot keep up with them.

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