Student Loans Compared to Credit Card Debt
Post subject: Student Loans Compared to Credit Card Debt
Guest: Jordan
Posted: Fri Jun 03, 2005 7:48 pm
I have around $9000 in college debt that is currently on a credit card at 0% APR for a few more months. Since I am a student I can get an unsubsidized Stafford loan at around 2.77% variable for a few years (I will pay off the debt before I graduate), or I can balance transfer to another card at 3.9% fixed with a fee of $50 or 75 (cant remember). My debt ratio is still low with this debt, as I have high limits on all my cards.
So I am wondering which type of loan will look better on my credit score when paid off? Since the Stafford loan is backed by the government, I am not sure if it is considered a secure loan or not, so I really dont know what is the best way to go. It is also a lower interest rate, but variable (changes annual), so I dont know how high it will be in the future. I also can always pay alot more than the minimum each month, so required payments arent a factor.
Does anyone know how stafford loans affect your credit score, and how it would compare to just keeping the debt on credit cards? With a Stafford loan you can also get around 5000 or 5500 a year in additional loans up to 23k, with a low interest rate even after graduation.
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
Guest: Polonius
Credit Expert (100+ Posts)
Post subject: Student Loans or Credit Card Debt
Posted: Sat Jun 04, 2005 1:07 am
Depending on the Stafford loan, the repayment period is 10 to 30 years and starts after graduation, with a special low guaranteed rate. It's a no-brainer--grab the Stafford loan. You have no assurance whatever that you'll continue to be able to get low-cost balance transfers or low-interest cards, and the cards will have to be repaid at a much faster rate anyway.
I realize your question was about credit scores. Stafford loans don't help for credit scoring, since until you graduate they don't have to be repaid. Without a payment history, they won't contribute to your scores at all I think. But that's unimportant. What's important is getting the education and not committing yourself to traditional interest rates and credit card terms, regardless of the affect on your scores. You're obviously in good financial shape now, but circumstances can change swiftly in the real world. Illness, marriage/divorce, children, unemployment can wreck the best of plans. Preserve the flexibility and long-term repayment possibility...and the low interest rates...of the Stafford!
Guest: Tigerdad101
Post subject: Student Loans or Credit Card Debt
Posted: Sat Jun 04, 2005 5:42 am
You really should grab a consolidation loan right now!
Rates on consoliation loans with be more than doubling at the end of June. Right now you can consolidate your loans (no credit check required) and get a rate of less than 2 percent. Since you are apparently still in school, you can turn around and have the repayment of the loan deferred until after graduation.
http://www.loanconsolidation.ed.gov/
http://www.loanconsolidation.ed.gov/hfaq.shtml
http://loanconsolidation.ed.gov/rate.shtml
The Stafford education loans are not considered "secured" and neither a Stafford nor a direct consolidation loan (from the above links) will do anything to hurt your credit or lower your credit score as long as you don't go into default. Lock in these once in a lifetime rates right now.
(Also see the Student loan consolidation forum at CreditBoards.com.)
Guest: Jordan
Posted: Fri Jun 03, 2005 7:48 pm
I have around $9000 in college debt that is currently on a credit card at 0% APR for a few more months. Since I am a student I can get an unsubsidized Stafford loan at around 2.77% variable for a few years (I will pay off the debt before I graduate), or I can balance transfer to another card at 3.9% fixed with a fee of $50 or 75 (cant remember). My debt ratio is still low with this debt, as I have high limits on all my cards.
So I am wondering which type of loan will look better on my credit score when paid off? Since the Stafford loan is backed by the government, I am not sure if it is considered a secure loan or not, so I really dont know what is the best way to go. It is also a lower interest rate, but variable (changes annual), so I dont know how high it will be in the future. I also can always pay alot more than the minimum each month, so required payments arent a factor.
Does anyone know how stafford loans affect your credit score, and how it would compare to just keeping the debt on credit cards? With a Stafford loan you can also get around 5000 or 5500 a year in additional loans up to 23k, with a low interest rate even after graduation.
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
Guest: Polonius
Credit Expert (100+ Posts)
Post subject: Student Loans or Credit Card Debt
Posted: Sat Jun 04, 2005 1:07 am
Depending on the Stafford loan, the repayment period is 10 to 30 years and starts after graduation, with a special low guaranteed rate. It's a no-brainer--grab the Stafford loan. You have no assurance whatever that you'll continue to be able to get low-cost balance transfers or low-interest cards, and the cards will have to be repaid at a much faster rate anyway.
I realize your question was about credit scores. Stafford loans don't help for credit scoring, since until you graduate they don't have to be repaid. Without a payment history, they won't contribute to your scores at all I think. But that's unimportant. What's important is getting the education and not committing yourself to traditional interest rates and credit card terms, regardless of the affect on your scores. You're obviously in good financial shape now, but circumstances can change swiftly in the real world. Illness, marriage/divorce, children, unemployment can wreck the best of plans. Preserve the flexibility and long-term repayment possibility...and the low interest rates...of the Stafford!
Guest: Tigerdad101
Post subject: Student Loans or Credit Card Debt
Posted: Sat Jun 04, 2005 5:42 am
You really should grab a consolidation loan right now!
Rates on consoliation loans with be more than doubling at the end of June. Right now you can consolidate your loans (no credit check required) and get a rate of less than 2 percent. Since you are apparently still in school, you can turn around and have the repayment of the loan deferred until after graduation.
http://www.loanconsolidation.ed.gov/
http://www.loanconsolidation.ed.gov/hfaq.shtml
http://loanconsolidation.ed.gov/rate.shtml
The Stafford education loans are not considered "secured" and neither a Stafford nor a direct consolidation loan (from the above links) will do anything to hurt your credit or lower your credit score as long as you don't go into default. Lock in these once in a lifetime rates right now.
(Also see the Student loan consolidation forum at CreditBoards.com.)
