Strategy #3 - Student Loans and Your Credit Rating

Before we continue I want to make you aware that a lot of factors can affect how much you pay back for a loan. We are only discussing oner of them here.

Your credit rating is one of them. If you are approaching your repayment in a year or two, you would be wise to make sure that you are diligent with paying your cretit card payments, record clubs, book clubs etc.

If you are like most students and you don't have a lot of credit products while you are in school, these things can really affect your credit ranking. Why should you care? Well, the better your credit score the better all of this will be from the get go. To illustrate this, I'll show a final example.

Suppose we compare to the 10 year example we showed earlier using a 6.5% rate from the start:

Scenario 1:
You owe $50,000, at 8% for 10 years (ie 120 payments)
Monthly Payment: $606.64
Monthly Principal & Interest Total: $72,796.56
Total of 120 Payments
Total Interest Paid: $22,796.56

Scenario 2:
You owe $50,000, at 6.5% for 10 years (ie 120 payments)
Monthly Payment: $567.74
Monthly Principal & Interest Total: $68,128.79
Total of 120 Payments
Total Interest Paid: $18,128.79

That 1.5% decrease in interest rate has decreased your interest paid by $4700.00. And you didn't do a thing!

That's all for now. We will be posting a few more strategies over the next month or so as time permits. Please feel free to contact us if you have a strategy of your own. We would be glad to add it to our list.