Student loans are the bane of your existence and you wish you could flick a switch and make them all go away. The situation is so bad that the UK Government has decided to sell £4bn of loans made to over 450,000 students. Don’t get any more worked up than you already are, the government has said controls will be put in place to ensure that terms remain the same. How do you get to tackle your loans?
- Know everything about your loans
The first step is do the necessary research and get information on loans in general.including the interest rates, total payment due with interest, term length, grace period, balance, fixed or variable rate, and whether they’re private or federal. It will help to put this information in a journal to help you keep track.
- Sign up for automatic payments
You might be able to get a small reduction in interest rate if you sign up for automatic payments. Even if you don’t, it’s a way to make sure you don’t default on any payments and get slammed with more fees.
- Focus on private loans first
Private loans are often less flexible and have higher interest rates than government loans. Focusing on tackling your private loans first could help you save thousands of pounds in interest, however, this is not to say you should abandon government loans.
- Consider refinancing
Having various debts with different interest rates can be overwhelming, but refinancing your student loan could help you get a better interest rate and enable you consolidate your loans into one monthly payment.
- Map out a workable plan
Map out a plan to pay back your loan in the most sensible way possible. Depending on the nature of your debt, you may consider any of these strategies:
- The snowball method suggests that you tackle your student loans starting with the smallest one. After you have made your monthly minimum payments, you take what extra money you have and pay up on the smallest loan. When you finally tackle that one, you move on the next one and continue to work your way up to the largest loan. The benefit of this method is more psychological than anything. It will help keep you motivated.
- The stack or ladder method suggests that you tackle your debts prioritising the loan with the largest interest rate. This approach will help you save a lot on interest. This method may be a lot slower than the snowball method but is probably the best choice if you are the patient type. When you eventually clear the first debt, the psychological rewards will be immense.