Building credit with college loans
Building credit with college loans
With the ever-increasing cost of education many students do not look at the positive aspects to borrowing a private college loan. The fact of the matter is a private college loan is just like any other loan, and any repayments you make on this loan will help build your credit history. In fact in many ways using a private college loan to build your credit history is far superior to using other forms of credit to build your credit history.
This is due to the often times favorable circumstances under which a private college loan is issued. Unlike say a credit card which could have exorbitantly high interest rates, a private college loan usually has much more manageable interest rates that can in fact be as small as a half or a third of the interest rate you would pay on a credit card. Not to mention aside from credit cards, private college loans are probably the only way to build your credit (next to a cell phone bill).
Let’s face it at this stage in your life it is unlikely that you have any mortgage payments to help build your credit, and a cell phone bill only shows so much responsibility. A private college loan on the other hand shows creditors the ability to repay large debts in a responsible and timely fashion; that is to say so long as you repay them. Additionally a private college loan generally has much more lenient repayment options than a credit card.
Although this is not true for all organizations that will issue a private college loan it is true for many of them. Not only will most places allow you to defer your private college loan for six months after you graduate some will even allow you flexible payment plans should you end up not making as much money as you initially assumed you would.
Granted this is done by extending the length of your payment schedule on the private college loan, but it is still a lot more flexibility than you would see with the collections department of a credit card company. All in all using a private college loan to build your credit history is a fantastic idea so long as you actually need a private college loan. Never take out loans you don’t actually need; and never take him out if you don’t think you can afford to repay them.
