After deciding where to go to school, which student loan to take out, and which comfort foods you’ll need to deal with the stress of it all, there are still a few other decisions to make when filling out that loan application. Depending on whom you get a loan from, one of those decisions could be about student loan term lengths — or in other words, the length of time you will be repaying what you borrowed. At Climb Credit, we want you to understand the pros and cons of each option and how they will affect you and your repayments. Here are a couple numbers whose impact you should take note of.
Monthly payment amount
One number you’ll want to pay attention to when deciding on a loan term is the monthly payment amount. The longer the loan term, the lower this payment will be. Though you may want to pay off your loan as quickly as possible, you’ll also want to have a manageable amount to pay each month. So, make sure you consider how your monthly payments will interact with your other expenses.
Need help figuring out your budget and how much you can afford? To find your current monthly expenses, add up last month’s credit card statement, housing expenses (e.g., monthly rent or mortgage), and any cash expenses. And check out these popular budgeting tools and methods!
Total repayment amount
But you shouldn’t only focus on monthly repayments when it comes to your loan terms. How long your repayment term is will also impact the amount you’ll pay in total. The longer the loan term, the higher the total amount is. After all, more months of repayment means more months of interest accumulation. So while it’s tempting to go for the lowest monthly payments, it’s also important to factor in that you’ll be paying more over time.
Each applicant will have a solution that best fits them; which solution that is for you will depend on your own financial situation. Finding a student loan term length with monthly payments you can afford — while accumulating the lowest possible total payments — is key to having a handle on your loan payments, maintaining a strong credit history, and keeping as little student loan-induced stress as possible in your life.
Have you come across any other phrases about student financing that need some clarity, or are you curious how other aspects besides student loan term lengths could impact you? Check out our post below for more definitions, and feel free to contact Climb Credit to chat with a team member!