How Effectively Are You Handling Your Student Balance Loans?
People take loans for various purposes in life. One of the most common loans is the student loans. Almost every graduate has it. The loans become due to the very instance you clear school. You will be required to pay back the amount owed. Student loans are expensive with high APRs of about 6%.
The high-interest rates of the student’s loan have pushed the borrowers to explore new avenues to finance the student loans. One of the most exploited ways is to pay off student loans with credit cards.
Want To Avoid High-Interest Charges? Pay Student Loans with Credit Card
When my student loans first entered the repayment period, I was freaked out by the massive amount of debt I owed my lenders. I couldn’t stand the four hundred and fifty dollars monthly slash on my paycheck. I didn’t know the options of paying off your student loans with credit cards. When the loans pressures mounted and the idea of paying huge amounts of interest hit me, I started asking myself; can I find a cheaper means of financing my student loan? Can I pay student loans with credit card?
That is when I discovered that I did not have to suffer from the burden of the balance of a huge loan that will accrue a lot of interest. I could just transfer funds from my credit card, with zero APR and avoid all the unnecessary charges, to service my loan.
Curious? Are you wondering ‘can I pay student loans with a credit card?’ Here are four simple steps on how to pay student loans with credit card.
- Get a credit card
First, you must apply for a credit card. Many companies offer credit card services. The application process is easy. All you need to do is provide your social security details and income details, the rest will be handled by the company. When looking for a credit card, you must look out for; 0% introductory APR rates and whether the credit card allows one to transfer student loans. Spend time shopping around for a credit card that has both these qualities. Additionally, you can inquire further about the rates of loan balance transfer. Settle for the companies that have zero charges on student loan balance transfer. You can use the money saved to help clear your loans.
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- Apply for a student loans transfer
After getting a credit card that has all the right qualities, you will then request a balance transfer. When transferring student loans there are some steps you have to take.
First, you have to identify the amount you want to transfer to your student loans. Next, with all your details in place, contact your credit card and inquire about the procedure to be followed. Usually, applying for a transfer will include filling a transfer form. Contact your lender and ask about the transfer receipt process.
- Carry out the transfer
Once you establish that they can receive the amount from the credit card service, you can then go ahead and carry out the loans balance transfer. Depending on your service providers you can carry out this process either online or offline. After carrying out the transfer, contact your lender and your credit card company for the new balances in your debt.
Take advantage of the 0 interest loans
What is the whole point of paying off student loans with credit cards? Is it not just borrowing one loan to pay another?
Well, the whole idea of using credit cards to pay student loans is to reduce the interest amount to be paid to the lenders. Most credit cards offer their customers cards with 0 interest personal loans for a specified period. During this time, the members are allowed to borrow and repay freely within that time frame without accruing any interest.
The interest-free grace period is exploited to take care of the student loans. After getting the card and carrying out a balance transfer to offset some of your student loans. You will only be left to repay the credit card debt which doesn’t accrue interest as opposed to the student loans which have high APR.
Is Paying Student Loans With Credit Card A Good Idea?
Sometimes one can’t help to wonder if all the hustles of borrowing from another lender to pay another is a good idea. You enjoy several advantages and disadvantages of using this approach to offset student loans. Some include:
- The most significant benefit of using credit cards to pay loans is the fact that you will get to save a lot of money regarding interest due. By exploiting the 0 interest service offered by the credit services you can clear your student loans by just paying the principal amount!
- Paying off student loans with credit card also facilitates a shorter repayment period. Depending on your credit card limit and the amount you are willing to transfer every year, you can be able to be out of debt in half the time you anticipated.
Much as using credit cards work for most, it sometimes has its own challenges.
- First, you run a risk of weakening your credit ratings. Transferring a huge percentage of your credit card amount increases your credit utilization ratio. A high credit utilization ratio weakens your credit card score, and your credit card limit might be revised downwards.
- Secondly, some credit card companies charge high transfer fees. The transfer fees might end up being as high as the student loan interests. If the charges are so high, there is no point of using this method, you may end up paying the same amount as the student loans interest.
Can you pay student loans with credit card? Yes, is it always worth it? No, not always.
You can easily maneuver the system and get away with the very minimal amount of interest paid once you understand how to work the numbers. Not everyone can hack this approach. Always check your personal and financial situations before using credit cards to pay off your loans.