Money Advice Guide

The student market is now one of the most profitable for the credit card industry as a whole. This is due mostly to the fact that many students only pay the minimum due each month, are often late with payments and tend to use cash advances more than typical consumers. All these activities represent huge fees and profit centers for the credit card companies that know if a student falls behind in payments that in most circumstances the parents will jump in and take care of the debt.

Making the right choices with your first credit card can be one of the items that help you build a solid financial future. We’ve broken down the areas of credit card usage by students by “The Good, The Bad and The Ugly”.

The Good

Students need to start building a credit history early so that when they enter the workforce they have a solid credit picture behind them to help them get an apartment, a car and a good job. By using credit cards wisely early on they will find that they can build a credit profile quickly that will help them throughout their entire life.

Students should always know that one of the bills that must be paid each month, without hesitation, is the credit card bill. One of the best things they can do is to keep the credit card out of their wallet and use it for only emergencies. By avoiding the temptation to use it to buy gas, movie tickets or other items they will be less likely to run it above its limit or build up a balance that cannot easily be paid off.

One tip that many banks offer to first-time checking customers is that they should obtain and use a debit card for a period of time as a precursor to getting a credit card. A debit card acts exactly like a credit card, except that the money comes straight out of your available balance and you typically cannot exceed your available balance.

The Bad

Unfortunately, credit card companies target students precisely because they know they are not good at money management and they will generate huge profits for them in late fees and other surcharges. Many times a credit card company will re-sell its customer list of students to other credit card companies who will issue them cards without requiring a fixed source of income or other assets.

Late fees and over-the-limit fees can quickly add up to $100 or more each month that you are over your limit or make a payment late. In a typical year the credit card issuer can earn over $1,200 on your account - not to mention the money they earn thanks to interest on your balance. Once you fall behind many people, especially students, find it very difficult to get caught up again without making major financial sacrifices.

The Ugly

Of course, with late payments and other fees students are damaging their credit rating. Every late payment goes on their credit report, and can paint a very bad picture for the student when they go to obtain a loan or participate in another financial transaction. What’s worse, if the credit card company closes the account and turns it over to a collection department their credit score can suffer an even greater hit. Once an account is closed by the credit issuer it becomes very difficult to obtain credit from any other source. After all, if they didn’t pay the first creditor why should the second creditor believe they will pay them?

A credit report follows you around for years after the original debt may have been charged off or paid off. A bad mark can stay on your credit report for 7 years - long after you have graduated from college. It makes it difficult to get the best interest rates or terms, and in some cases can bar you from getting credit at all.

Learn more about student credit at http://www.studentloansdot.com.

Tags: credit, credit card, credit information, line of credit, student loancredit, credit card, credit information, line of credit, student loan

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A Student Finance Corpration is an organization which handles lending to students for educational purposes and similar or related matters. Normally the loan would cover tuition fees and other associated expenses like lab fee, living expenses, money for books, etc.

Who can get this loan?

Most student loans come in a variety of forms and the eligibility for them varies. The two broad types are federal and private. There are various types of loans for undergraduates, graduate and degree courses. The amounts depend on one’s financial standing, grades, course for which application is being made.

You’ll find that the Student Finance Corpration has two broad umbrellas under which it provides loans - Federal and private loans. Federal loans are provided under the Federal Family Education Loan Program and are guaranteed by the government. Among Federal Loans Stafford loans are the most common ones and are subsidized and otherwise. Perkins Loans is another Federal Loan which is more desirable because of the terms on which it is available. However, each campus is only allotted with a limited amount of Perkins loans and it’s normally allocated to students with the greatest financial needs.

On private loans. the persons financial standing play a much more crucial role in determining the loan amount than the financial needs and they are based on your credit ratings etc.

OK - How do I get the loan?

Accordingly, the student finance corprations disburse the loan directly to the schools normally and the schools after charging for their tuition etc. will pass on whatever remains as a balance to you in the form of a check.

Do I have to pay interest?

Mostly this depends on whether you have a subsidized or unsubsidized loan. A subsidized loan is one where the government pays the interest on the loan while you are attending school and is given on a need basis. The interest rate is generally floating however, the popular Stafford loan program does not exceed 8.25% and it’s currently at 5.3%.

Interest rates for the Perkins loan is just 5% whereas PLUS - a loan which is yet again another Federal loan is currently at 6.1%. (at time of writing)

Interest rates for the private loans depends on your credit ratings and usually is between 1 - 7% of the Prime Interest Rate.
You should keep in mind that while the ‘not for profit organizations’ do not charge any fee, other organizations (apart from charging interest) may also charge a fee which can again be around 4% of the loan.

In most cases the interest starts accumulating as soon as the loan is disbursed so even when you are not repaying the loan you are being charged interest which you’ll have to pay back later.

How do I repay the loan?

After finishing your course there is normally a six month grace period after which you will have to commence repayment of the loan. In the case of a subsidized loan there will be no interest in this grace period as well. Normally the repayment period will not exceed 10% and in the case of some loans like the Perkins loan, you’ll normally be asked to pay the school directly.

Here again there are various ways in which the student finance corpration can ask you to repay the loan. There can be fixed payments which mean that you will have to pay the same amount each consecutive month until the end of the loan. Or, there could be a repayment scheme which is based on your gross monthly income.

Then there are two tiered and four tiered repayment options which basically involve lesser outgoings at first and then gradually the payment is increased.

If you have taken multiple loans then there is an option for consolidation of these loans as well. What this basically means is that all your loans will be clubbed together by the corporation and the longest term will be taken with the interest rate as the weighted interest rate of all your loans.

When you pay the installment you save tax!

The amount that you repay is allowed as a deduction for tax purposes and the maximum than can be claimed is $2500 over the life of the loan repayment.

Author - Bill Darken - There’s a good student loan area along with more relevant general loans assistance such as home, car, and consolidation loans. There are highly informative eye opening articles and up-to-date loans news at as well, see it all here at federal student loan information or if the previous link is not working, you can paste this link in your browser - loans-only.com.

Tags: college loan, student, student consolidation loan information, Student Finance Corpration, student loancollege loan, student, student consolidation loan information, Student Finance Corpration, student loan

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