Don’t make these mistakes when taking out another student loan
Updated on June 8, 2020
Knowing you can take out another student loan is always a relief to many students. However, this doesn’t mean you should misuse your first loan. For instance, buying a car to impress your friends isn’t putting your federal student loan to good use. Remember, the more you borrow, the longer it takes to repay your loans, and the higher your chances are to default.
Unfortunately, students often make mistakes when taking out the second or third student loans that cost them in the future. Here are some of the mistakes you should avoid.
1. Borrowing too much
Simply because you can borrow the maximum amount doesn’t mean you should. Since you already have student loan debt, borrowing too much only adds on to it, increasing your financial burden when making repayments.
For your second loan, it’s advisable to borrow what you need to pay for your college expenses. Start by creating a budget so you know how much it will cost you to complete the rest of your education. Look for ways you can cut down on these costs, e.g., getting a part-time job. This way, you can minimize your student loan debt after graduation.
2. Living off your student loans
You probably made this mistake with your first loan, meaning you used it up quicker than you expected. Therefore, for your second loan, avoid splurging it on living expenses that you can’t otherwise afford.
Whether it’s attending a carnival, renting a furnished apartment, or buying designer clothes, you should never live off your federal student loans. Instead, focus on educational expenses such as:
• Textbooks and material
• Housing (in your school)
3. Going for private student loans first
Although private institutions are a viable option for student loans, they shouldn’t be your first choice. Private student loans not only offer high-interest rates, they also don’t provide flexible repayment terms.
Before applying for private student loans, it’s wise to exhaust federal student loans, scholarships, and grants first. This is because federal student loans, for example, have better repayment terms and are significantly cheaper.
Contact StudentLoanify today for more information about student loans.