Student Loans vs. Credit Cards: Part 2

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Continued from Part 1

Student Loans vs. Credit Cards

Credit Impact

Student loans and credit cards both show up as debts on your credit report. The difference is that credit cards are revolving debts, which means that they can fluctuate from month to month. Credit card payments will do more for your credit score than student loan payments, but defaulting on a credit card will also hurt your score more in the end. Most lenders will not care much if they see student loans on your credit report, but they will have issues if you have excessive credit card debt.

Borrowing Limits

Every student in America has a capped amount of federal student loans he or she can accumulate. This varies based on the type of school the student is attending (undergraduate vs. graduate) and the type of loan he or she gets. Private loans reach above these limits and can fill in the gaps that federal loans may leave. As a whole though, most students are eligible for more than enough money through student loans to cover their education costs, especially if they are able to secure scholarships and grants along the way.

With credit cards, on the other hand, your borrowing options are quite limited. Chances are that as a college student, you do not have enough credit to get a large limit on your credit card. You might be able to get one card with a $1,000 limit, but you won’t be able to do much more than that. If you need more money than what your available credit will allow for, credit cards won’t do you any good.

When Student Loans Work Best

As a whole, student loans are better than credit cards for college debt. They have higher limits, lower interest rates, flexible payment options, and less of an impact on your credit. Federal student loans tend to be more affordable than private student loans, but there are unique opportunities around every corner. You simply have to find the loan that is most affordable for you and make an effort to pay it back over time.

When Credit Cards Work Best

The only time credit cards work better than student loans for college debt is when you have a small amount of money to pay and you plan to pay it off right away. You might be able to get a no interest credit card that you can pay off the balance on within the intro period. In that case, you will be able to build a lot of credit and get out of your debt without paying any interest.

Final Takeaway

Before you even consider student loans or credit cards, try to get as much payment-free financial aid as possible. Apply for student grants and scholarships as often as you can to minimize your out of pocket expenses. Then consider the information above to determine the best route to take for your debt. With the right amount of evaluation, you should find the perfect solution for your education.

Student Loans vs. Credit Cards: Part 1

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What Should You Use When Scholarships Aren’t Enough?

Most college students cringe at the idea of getting student loans. This is the dreaded side effect of going to college that people try to avoid at all costs. Nevertheless, there may come a time when your scholarships and grants simply do not cover your cost of attendance. You have to find a way to pay for the leftover expenses out of pocket.

If you are trying to find a way to pay off your college debt, you may consider getting a credit card to pay your bills. There are a few advantages to this, but there are a number of concerns you need to keep in mind as well. Here is a comparison of student loans and credit cards to help you decide which option works best for you.

Student Loans vs. Credit Cards

The easiest way to compare student loans and credit cards for college debt is to look at the features that apply to both of them. These include:

Interest Rates

Federal student loan interest rates range from 4.66% to 7.21%, depending on the type of loan you get. The average credit card interest rate is 13.02% to 15.57%. You can get a credit card with a 0% interest introductory offer, but that will only give you 12-18 months of no interest payments. If you cannot pay off your debt in that time, you will have an even higher rate to deal with in the end.

Payoff Periods

The payoff period for federal student loans is 10-25 years, which gives you plenty of time to recover from your college debt. Credit cards do not have set payoff periods. You essentially pay on them until your balance is gone. The amount of time this takes will depend on how much money you pay each month and how high your interest rate is. You could pay off your credit card in less than 10 years, but chances are you will be paying it off much longer than that if you only make your minimum monthly payments.

Monthly Payments

There are several different options for monthly payments with student loans. Some people choose to pay based on a fixed timeframe, while others pay based on a portion of their income. If you are not making much money now but have the prospect of making a lot in the future, you may consider the income based option. These payments can be as low as $5 a month. If you do not see any fluctuations in your pay rate over time, a fixed payment might be best for you.

With credit cards, you have to pay whatever the minimum amount is for your card. This varies greatly by credit card. Some will charge you a percentage of your current balance, while others will charge a fixed rate plus a percentage of the balance. Most minimum credit card payments are about $15 a month.

Continue to Part 2

Easy Steps to Free Application for Federal Student Aid Loan

Free Application for Federal Student Aid Loan is also known as FAFSA. It is the financial aid provided to the students in order to fulfill their educational expenses. Seven steps need to be followed for application process. The most important thing that should be kept in mind is that, the application process is free of cost so if any person demands for the money then he is a fraud. You can also submit an online application form.

Step number 1

First of all the student needs to log on the website, if he is already registered with the site. If you do not have any account at the website then you have to register yourself first. You have to provide your full name, social identity number and date of birth of the students. After login the website, you can get the access to the website. You can take help from the source provided on the website.

Step number 2

In the second step, the student needs to provide his demographic information. In this section the other required things are gender of the candidate, the mailing address of the student, zip code is required, contact number of the student for payment delivery, marital status of the candidate and answers about driving license of the candidate. The eligibility of the student is also monitored either he is a citizen of the USA or not. The status of high school completion is also required in student eligibility section.

Step number 3

The next step for the application is the school selection process. At this stage you have to select your state name. Based on that, you can select your city and then your school name. If you know your school code then you can get information about your school simply by entering the code.

Step number 4

The next step is the information dependency status of the applicant. In this form you are required to answer different questions about your monitory dependency. You can also give them information that either you can provide your parents’ information or not?

Step number 5

The next step of the form requires the information about the demographics of parents. Where do the parents of the candidate live? What do they do and what are the reasons that they are unable to support their children. All this information is necessarily provided to the organizations so that they can support the real needy students scholarships rather than those who can support their own.

Step number 6

After completing all this process, you have to sign this application form and submit it. Once you have to complete this form carefully and secondly you have to submit it carefully so that you can have maximum chances to win the scholarship.

Step number 7

Conformance is the last step in the process of application. You can confirm about your application simply by checking your mail. The organization has the best management that sends mail to all its applicants after receiving their applications. It is very helping and essential to inform the candidates about their applications.

You should be ready for all kind of difficulties you can face. All the steps must be completed carefully before sending the application. The provided information should be authentic so that they can communicate easily.

Difference Between Scholarships and Loans

All the students who cannot afford their educational expenses, need some financial support. Some students apply for the scholarships where as some of them apply for the loans so that they can easily fulfill their essential requirements. Both the scholarships and loans are financial aids that are especially designed to help the students and other people. Since both are fulfilling the same needs of the people, but there is a huge difference between these two as well.

• The money that students get as the result of scholarships is the awarded money and student have no need to pay it back where as the money that a student get as a result of loan is not an award and the student have to pay it back to the organization after some period of time. Based on the period of time, the student also has to pay the interest to the company. All the interest rate and the duration are decided before getting the payment.
• In order to apply for the scholarship, you need to maintain good grades as well as you have to provide detailed information in your application while on the other hand you do not need to maintain a certain GPA to apply for any loan.
• You have to struggle a lot in getting scholarship because there is a huge competition among the applicants, while on the other hand you do not have to work so hard, but there is a huge chance that you can get it.
• Scholarships are offered by many organizations and institutes, but loans are provided by government organizations like banks and some other special institutes.

All the scholarship holder makes their own place in the society, either by hard work or with the help of other skills like communication skills, problem solving skills and many others.