- Learn more about credit card management on our Credit and Credit Cards page.
- Understand loan terminologies such as deferment, forbearance, default, loan servicer, repayment terms, and grace period.
- Before borrowing, calculate your monthly payments using a loan calculator.
- If you have an emergency fund in place and are already investing for the future, consider making extra payments on your loans to reduce the total interest you pay over the life of the loan. Before taking out a loan, compare lenders and choose one that does not charge prepayment fees or penalties.
- Federal Subsidized student loans don't accrue interest while you're enrolled in school. Because of that, it often makes more financial sense to invest extra money rather than make early loan payments. As a general rule, consider paying off debt first only when its interest rate is higher than what you expect to earn from investing. Historically, the stock market has averaged annual returns of about 8–10% over the long term.
- Protect your credit. If you cannot pay your loans, or any creditor, proactively contact them and ask about your options for deferment, forbearance, refinancing, or changing your repayment plan. Do not wait until you receive a delinquency or collections notice because it will already be on your credit report by then.
- Avoid emergency or pay-day loans as they can charge 100% - 200% annual interest rates.
- Learn about the different federal student loan repayment options before you choose to move forward with any.
- A common guideline is to borrow no more in student loans than you expect to earn during your first year of your career.
- Before getting a loan to purchase a car, ask yourself if this purchase help or hinder your ability to achieve what you want to accomplish financially in the near or distant future.
- Home ownership: Many first-time homebuyers no longer made a 20% down payment. Instead, they use first-time homebuyer assistance programs, which may allow them to purchase a home with as little as 3-5% down, depending on the program and the lender. This can leave more money available for other financial goals, like investing. While a home can increase in value over time, a primary residence should not always be viewed as an investment. Unlike stocks or other investments, homeownership comes with ongoing expenses (maintenance, insurance, property taxes, interest) that can reduce your overall financial return. Over time, as you build equity in your first home, you may be able to use it toward the downpayment on your next home. Keep in mind that first-time homebuyer assitance programs are generally available only for your first home purchase, even if you move to another state.
- Pay yourself first by contributing to your retirement account before making extra payments on your debts. The exception is high-interest debt, such as credit card balances, which should generally be paid off first. Don't wait until you're completely debt-free to start saving and investing. See the Saving and Investing section of this site for more.
