Does a Student Loan Lead to a Life of Debt?

A student loan can be a big worry for parents, students and graduates. Depending on what country you live in, the loan scheme can vary a lot and you might only have to pay it off when you can afford it and only repay for thirty years before it is written off or you may have to keep paying it back until it is all gone. Usually you will not have to make repayments until you finish your course and you may be able to defer payments if you are not working or earning a low amount. Whatever scheme you use, there is still a concern that having a debt so young can then lead to you continuing the path of debt through your life.

Does debt cause debt?

The argument that debt can cause debt is an interesting one. People worry that once you borrow money you then think that borrowing is completely acceptable and borrow more and more. However, this is unlikely to be the case for everyone. There are some people that do borrow all of the time and others that borrow occasionally and some that do not borrow at all. This can be because of the way that they have been brought up, their attitude towards money and whether they have a need to borrow money.

Having debt early on could actually make someone more cautious about getting into debt at an older age. They may understand more about the stress that goes with being in debt and the responsibility of making sure that you have enough money to make the payments.

Of course, there is also the other side of the equation as well. It might be that you will be used to having money for nothing and think that this is a great way to live your life. That if you borrow you will not have to earn and you will be able to buy all that you need. Hopefully most people do realise that they will have to repay everything that they borrow and they will also have additional charges to pay and so they will need to be very careful with any borrowing that they decide to do.

Is a student loan worthwhile?

Most people do think that a student loan is worthwhile. This is because getting a degree or other qualification will lead to a better paid job. Therefore, although the loan repayments have to be made and the loan costs also have to be covered, the increase in salary will mean that there should be plenty of money available to pay this. If that increase in salary continues for the graduate’s whole career then they will make back many times what they have paid out. Many people also feel that going to university provides a valuable life experience where a young person moves away form home and has to learn to look after themselves. However, it could be argued that they could do this without going to university but move away and get a job instead.

Is all debt bad?
It is also worth thinking about debt in more depth. There are good and bad debts and so taking on debt may not always be a bad thing. If you get a home loan so that you can buy your own house or apartment, one that you can afford, then this would be considered to be a good debt. You will be able to avoid paying rent and you will end up with a place that you can call your own and sell if you need money or pas son to your children. However, if you take on lots of credit card debt because you want to buy all of the latest clothes, which you rarely wear, then this would not be considered to be good debt.

You also need to make sure that you are not paying more than necessary for your debt. With a student loan, you are best to use the government schemes as they tend to have fairer repayment terms and lower interest rates but do look carefully at your options as you will need to compare to make sure that you are getting the best priced loan.

Obviously borrowing the least amount possible is best as well. So, if you can work while you study so you do not have to borrow as much this can help. You may also be eligible for grants or scholarships so it is well worth investigating these as well. You may also want to consider saving up for things and delaying buying them rather than borrowing the money for them. This may not be sensible with a student loan as the sooner you graduate; the sooner you will be able to earn more money and so it may work out better to borrow the money and then repay it rather than trying to save up. Courses can be so expensive that it could take a very long time to save up for them, the same way that it would take a very long time to save up for a home if you decided to save rather than take out a home loan.

How to choose a guarantor

Choosing the guarantor is probably the hardest part of this decision. You will have to think about whether you know anyone that is willing to help you with this. You might choose a family member or a friend but they will also need to have a good credit score as the lender will check this. It is really important to make this choice carefully as you will need to think about whether it will have an effect on your relationship with them. You will need to consider whether you might fall out over this or whether it might impact what they think of you. Imagine the unlikely situation that you cannot make any of the repayments and how that might make them feel and what effect that might have on how they feel about you as well. If you know someone that has offered to help you out financially then they could be a good choice. Otherwise you will need to think carefully about who you know, their financial situation and whether they are likely to help you. Then you need to think about how them being your guarantor might have an effect on your relationship with them.

How it compares with other loans

A guarantor loan is different to other loans because it relies on you having a relationship with someone else where they will be prepared to make the loan repayments if you cannot afford to. It is also quite an expensive way of borrowing which means that you should be really careful to compare it to other forms of borrowing with regards to costs as well as comparing different guarantor lenders to find the cheapest. If you have a high credit score then you may be able to apply for alternative types of loans which could be cheaper so it is worth checking this out first. If you do not have a good credit score then there will be other loan options available to you as well; such as pay day loans. These tend to lend smaller amounts of money and can still be quite dear but work slightly differently in that you repay them in a lump sum. This could be more suitable for your needs and it is worth considering them. You may also be able to get a loan where you use something as collateral such as a log book loan using your vehicle. These have a different set of risks associated with them as you could potentially lose your vehicle if you do not keep up the repayments, but it might be a better option for you. It is certainly well worth comparing the different types of loans available to you to make sure that you find the one that is most suitable. Not only could this save you money but it could also mean that you get one that fits your purposes better with regards to the repayment schedule and other features. Take some time to consider it because it does not need to take too long but will be worth it.

Is a Guarantor Loan Right for me?

There are many types of loans available but if you have a low credit score then you may be more limited in what you can get. Many of the standard loan types will be unavailable but there are still some products that will be and a guarantor loan is one of these. These loans can still be more expensive than other types of loan but they do give those with a poor credit record an opportunity to borrow money. It is worth having a good understanding of how a loan like this works and then you will be able to decide whether it is the right type of loan for you.

What is a guarantor loan
With a guarantor loan you need to nominate a guarantor who will cover the cost of the loan repayments if you are not able to manage them. This means that you will have to find someone that has a good credit score and who is willing to help you out if you need it. You will be expected to cover the repayments yourself but in the case of you not having enough money then they will be asked to pay instead. You will obviously need to find someone who is willing to help you out like this. It might be that they are a family member or a close friend. They would need to have a good credit score too. The loans are for higher amounts of money than other loans that are available for those with a low credit score such as a pay day loan which means that they can be more useful and will allow the borrower to be able to buy more things with the money they get.