Banks are a great resource to visit for information regarding school loans. Unfortunately, banks are also where many sales occur. In theory, banks make plenty of money from student loans. Banks need the students to continue taking loans because that’s one of their major financial instruments. Therefore, certain information you will not be told when consulting with your bank in regards to loans. Read below for 5 distinct examples.
#1 How long it’ll take to pay them off: Most banks are hesitant to tell you exactly how long it will take to pay down loans. Don’t expect them to just come out providing this information. You will need to ask questions and have them layout your payment schedule including interest. Truthfully, they don’t want you planning for the process of repayment. In their minds, minimum payments are best because the interest draws out for much longer and that equals more cash for the banks.
#2 How much interest you’re on the hook for: They also neglect to mention exactly how much interest you end up paying after the loan is fulfilled. Again, banks won’t make mention of this information strictly because it effects their bottom line. The more interest you’re paying, the more money they are making in the long run.
#3 How late payments and unpaid loans damage your credit: Here’s the most important thing banks don’t mention. Let’s first speak about late payments. Paying loans late can lead to a disastrous credit rating because banks will report late payment to the credit bureaus. Once the payment is reported late, you’re toast! Your credit score drops instantly and it automatically lowers your ability to acquire important things like real estate. Even worse, some young students neglect to pay student loans all together causing them to drift into default. Not only will default have similar effects as making late payments but your ability to obtain security clearances, new jobs and affordable auto insurance may now be in jeopardy.
#4 Programs that assist with financial hardship: Here’s another major issue, banks often neglect to mention programs that may assist students in case of financial hardships. We’ve all faced them on one account or another. It could be job loss, a family death or identify theft. Bottom line, banks should have programs in place that help people during financial hardship and they should be upfront and open about these programs with students and parents. I believe this could make for a much better experience for students to know that someone is there to help if things don’t work out as planned.
#5 Behind loans: Ultimately, student loans are great for kids who need help getting their education. People must be smart enough to not only understand the dynamic behind loans but what questions to ask regarding them. It can be very confusing and tedious but by asking the right questions, you can save yourself years of heartache and lost money. Be sure to team with your financial advisor and your loan officer to determine what fits your family’s financial situation best.
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