Watch Out For These Three Most Common Student Loan Myths

Parents and students can easily be swayed to make the wrong decision based on the misinformation that surrounds student loans. Validating the facts is crucial nowadays to make an informed decision on what loan is right for you. 

Keep reading to learn about the top three student loan myths that you should look out for.

Myth 1: Always Choose Refinancing

The overall expenses of education are increasing. As more lenders flood the market, the rates of student loans keep changing every year. This makes a number of students think to refinance their student loans so that they can get a lower rate than what they currently have. You should do your research before falling into this trap. You may get a lower rate than your previous ones, but it can land you in even greater trouble. 

When you’re refinancing your student loan, the credit gets transferred automatically into a private student loan. This means you’ll also lose all the benefits that you had with the federal student loan. 

There are a number of benefits that you get with federal student loans such as repaying as per your earnings, waiving off some amount depending upon your financial situation, deferment, forbearance, and discharge. You might get a lower rate of interest with your refinancing, but it’ll jeopardize your finances in the future. 

Myth 2: Low Interest Rates When Your Go For A Federal Loans

Most students apply for federal student loans without looking at their other options. The main reason why students and parents don’t shop around is due to the low rates that are being offered by federal student loans. 

The primary factors that determine a low rate is your credit score, income, DTI-ratio, and so forth. Additionally, the rates will continue to fluctuate. For instance, if you have a variable interest loan, you may enjoy a lower rate initially, but the rate will increase over time. 

On the other hand, there are many benefits to getting private student loans. Private loans give you a better chance of receiving a higher credit amount. These extra funds can be used for other important things apart from your tuition fees. If you select the right lender, you can even get lower rates along with a higher loan amount. 

Before applying for one, do the proper research and compare different lender programs. Get the right facts and then apply for the most beneficial credit.

Myth 3: Take Out The Max Loan Amount, No Matter What

In some cases, once you apply for the credit, the lender may offer you more than what’s needed. It can be enticing to take the maximum amount offered, but this isn’t always a good idea, especially if you consider the repayment terms.

The higher the loan amount, the more difficult it gets to pay over time. You’ll also end up paying more interest over the life of the loan. A higher debt impacts your credit utilization and increases your overall debt-to-income ratio, thus making it difficult to get approved for other loans or credits down the line. 

If you’re looking out for some good private student loan options, here are some of the brands that you can consider:

• Credible. Credible offers you the benefit of personalizing your rates so that you can get the one that’s most suitable for you. Easy to fill out forms is an added bonus. The brand also offers you the option of flexible repayments so that you can repay back the amount as per your convenience 
• CommonBond. CommonBond is a name that is being relied on by a number of students and parents now. This is because it offers a number of benefits. It not only offers you funds for your higher education but also grants you funds for any of your personal finances. The refinancing option is easily available with this brand, thus offering you even more convenient solutions under one roof
• College Ave. You can choose from a variety of rates. These rates are based on requirements and other defining factors. You can also get different repayment options with this brand