1. Borrowing means defining a new budget
Your money will need to be allocated to new financial responsibilities. In order to make sure you can pay off your loan bill every month, you will need to understand your budget and know where your money is going.
2. There is fine print
There may be something hiding in plain sight. Be sure to know your loan and everything that comes along with it. Are there hidden fees? What will your monthly payment be when you graduate
3. Interest needs to be understood
This may seem like a no-brainer, but interest can be hard to comprehend. We often don’t fully understand financial concepts when applying for and accepting loans. A loan needs to be paid back, with interest. The standard student loan rates can be as high as 8%. By the time it is paid off, you’ve often spent hundreds more just on accumulated interest.
4. We must think carefully
What is a loan doing for your future? Do you need all of the money being offered? How do you plan to pay the monthly bill? What is your long-term plan? Be sure to ask yourself questions, because taking out a loan is a long-term commitment. If you are looking solely to build credit, getting a credit card may be the best option.
5. It isn’t necessarily a bad thing
Loans can be scary and the thought of going into debt may be terrifying. Know that you are taking out loans to better yourself and your future. They help you pay for school and get a degree in something you’re passionate about, leading to a higher earning potential in the future. If they weren’t worth it, you wouldn’t see so many people investing in them.
6. Loans come in all shapes and sizes
Using your credit card for a purchase or borrowing money for college are both considered loans. Not all loans are created equal, and many of them can have drastically different amounts and interest rates. It’s important to understand how much you need to borrow and what it is going to cost you in the long run.