Paying Back Student Loans – Understanding Your Options
Loan Repayment Plans (also known as acceleration plans) are a way to quickly pay off your debts, by reducing your interest rate and your monthly payments each month. They are especially popular with students who find it difficult to keep their heads above the financial waters during the academic year. Because Accelerated Loan Repayment Plans reduces your monthly payments by a large amount, they can save you a great deal of money in the long run, helping you to avoid financial difficulties as you leave college and enter the workforce. This article will help you understand how an Accelerated Loan Repayment Plan works and why you should consider using them to help with your academic requirements.
Unlike a standard repayment plan
Accelerated Loan Repayment Plans do not require you to earn any special education credits or prove any special ability. Once you have enrolled in an Accelerated Loan Repayment Plan, your lenders will repay all of your outstanding debt at once, regardless of your credit history. For most students, this is an attractive option since traditional repayment plans usually require students to earn a certain amount of credit hours before they are eligible to begin repayment. If a student wishes to accelerate their repayment period, they must first apply for an additional financing loan to cover their increased obligations. Once approved, this additional financing loan will be applied to the total principal balance due on the original loan and will be repaid over the extended period of time chosen at the time of application.
Accelerated loan repayment plans offer
the borrower a way to reduce their payments by up to half in five years. Depending on your individual circumstances, this may be enough time to start building a financially comfortable lifestyle. With a standard repayment plan, borrowers must make their monthly payments for a minimum of five years, on average. Students who wish to repay their loans early can do so by choosing an accelerated repayment plan. In many cases, a borrower will see substantial savings in just three to five years.
In some cases
borrowers will also qualify for a discretionary income repayment plan. With a discretionary income repayment plan, you will repay your loan early and have the balance of your loan paid off in five years or less. A discretionary income repayment plan allows the borrower to choose a repayment period that meets their needs. Borrowers with the highest discretionary income can choose to make regular, timely payments, while other borrowers can choose to make more flexible payments. In some cases, a borrower can choose to make payments that are significantly lower than their other monthly obligations.
As noted above
in some cases, a borrower will qualify for a higher interest rate or a longer repayment period on their student loans. If you want to take advantage of these options, you should apply for the same loans with the same lender you are currently working with. Then, once you have received your new loan, make sure you read the terms of your new agreement very carefully. If your new lender’s repayment plan offers a significantly better interest rate than your current lender, by all means, go with it; if you do not, you could end up paying more in the long run.
It is also important to remember
that while your payments may be lower initially when you start repaying your loan in cash, this monthly payment will rise over time. Remember that repayment on a loan is simply a loan. Your lender is simply repaying the amount you have loaned to them over a certain period of time. The interest on that money will continue to accrue at a predetermined rate. Therefore, any amount you pay in cash payments will eventually add up to more money you will have to repay in interest.