Are You a Student In Need of a Loan?

There are plenty of sites offering loans for students.   I found one recently that is aimed at students who had good credit.  It is appropriately named goodstudentcreditcard.com.  This site offers some links to credit card companies and schools offering loans.    If you are looking for additional information about how to pay for college, I have written an article you might want to check out by clicking here.

Before students automatically just apply for loans, they need to be educated about credit and be aware of issues with over-extending themselves with credit.  I wrote about this in my article for mytwodollars.

• 76% of undergraduate students have credit cards, while carrying a balance of over $2000, according to Nellie Mae. 28% percent of students roll over their debt each month.
• College graduates are finding that they are over $20,000 in debt, according to Creditcards.com.
• Charles Schwab reported in a 2007 survey that 45% of teens have credit cards but only 26% know how to understand how their fees and interest payments.

Don’t assume that just because a credit card is being offered to students that it is going to be in the student’s best interest.  New York Times featured a story about how colleges profit from marketing credit cards to their students.  Michigan State University came under fire as it was noted that they allowed Bank of America to offer advertising items to their students to sign up for banking and credit services.  In fact, according that the New York Times (2008) “Bank America’s relationship with the university extends well beyond marketing at sports events.  The bank has $8.4 million, seven-year contract with Michigan State giving it access to the students’ names and addresses and use of the university’s logo.  The more students who take the banks’ credit cards, the more money the university gets.  Under certain circumstances, Michigan State even stands to receive more money if students carry a balance on these cards.”

I do recommend that people have a few credit cards to establish that credit.  However, they should only be used sparingly and balances paid off monthly. 

Why get them or use them at all?  You need to establish proof that you are able to pay back money you have borrowed should you ever need to buy a major purchase such as a house or a car.  Unless you were born with Paris Hilton’s trust fund, I highly doubt you will be able to come up with $200,000 in cash for a house. 

When you do need to borrow a large sum of money like that, the bank lending it to you will want to see that you have a strong credit history.  That is why it was important for you to have paid 3 or 4 different credit cards on a timely basis.

When you get a credit card, be sure you know the interest rate you are paying.  Sites like http://www.Bankrate.com show you different types of cards that are available and the rates they charge.  If you have a high rate already on a card you have, you can transfer your balance to another credit card with a lower rate.  This may be a good idea should you find a card with better rates and fees.  Just be sure that once you transfer your money, that you do not close out your old credit card.  Just leave it open and don’t ever charge on it any more.  It actually hurts your credit score to close out old credit card accounts.

To hear my recent radio interview where I discussed personal finance issues for the young adult, click here.  For more information about personal finance for the young adult, click here.

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