The average person pays for his college education through loans. However, with so many choices available, it is difficult to decide which loan would be the most suitable. Credit cards are generally regarded as the worst kind of loans and most people blame them for falling into a debt trap. Student loans are considered to be much better as they are specifically designed to suit the requirements of the college goers. However, the rising student loan debt really makes one wonder whether they are really a better option than credit cards.
Student loans are primarily meant for students who need financial help for higher education. On the other hand, anyone can get a credit card regardless of the purpose. These are entirely different kinds of loans with varying terms and conditions. A student who wishes to pursue higher studies is eligible for a student loan at fairly lower rates of interest than that of credit cards. Additionally, he does not need to have a job or credit history to be eligible for obtaining the loan.
Moreover, the repayment terms are totally different. It is expected that the student will repay his loan only when he completes his studies. Even then, the repayment schedule will depend on the level of his income. On the other hand, credit card repayments begin immediately irrespective of the fact whether the borrower has a job or not.
Credit cards are only viable if the student has some source of income and can pay back the amount he spends every month. If he is just making the minimal payment required, then the chances are he is heading for a debt trap. In fact, if the student has a part-time job or if he works during the holidays, he can safely use a credit card. As long as he makes his credit card payments on time, he is not paying an interest on the amount spent.
Probably, a better option would be a judicious mix of all resources to finance your education. The student may take out a student loan to cover his tuition fees but may use other resources such as a part-time job to cover living expenses. One can also opt for a credit card which he may use only for emergencies and take care to repay in time.
Often students think they can defer the loan for a later date but they forget a very important point in the process. Student loans will continue to accrue interest even when you have managed to work out a deferment with the loaning company.
While college education does improve one’s chances of getting a better paid job, students should really make a realistic analysis of how much loan can they really pay back after their education. It makes no sense for the student to start his life with a huge loan pulling him down.
Sometimes, it is better to opt for a vocational course that can enhance the person’s skills in a given field and help him get a better job. One can get career and professional loans that are specifically for this purpose. The best feature of this loan is that the Skills Funding Agency bears the interest of this loan for the duration of the training and one month after it.
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