Student loans are the financial help that covers almost every cost during the academic years of a student. It is one of the most popular loan options with some huge numbers of borrowers in Ireland itself. However, the overall cost and hefty instalments do make life difficult for young graduates.
The moratorium period provides some relief after the graduation for maximum a year. But there is no guarantee of a good paycheque to repay the loan with no trouble. Here, we have mentioned some reasons why student loans are not the best solution for middle-class people.
Lower Credit Limit
You already have a huge debt to repay that reduces the amount of credit available on your profile. Banks will put your application on the ineligible column for a considerable loan amount. This leads to some significant consequences during financial emergencies because you need to find some collateral or guarantor.
Some private lenders may come to your rescue by providing financial help during distress. You need to have a solid repayment plan to apply for urgent loans in Ireland from these lenders. However, the interest rates and terms may not be the same as the lengthy traditional borrowing methods.
Buying Real Estate is Not Possible
Mortgage providers check the repaying ability and credit history of the applicant before approving their request. Your student loan may hurt the financial assessment conducted by their representative. Therefore, buying a house may become a distant dream for you.
In addition, it is not a good idea to have another expense stressing the budget every month. Both house mortgage and student loan are long term loans that will take years to repay. Any high cost in between will leave you with some defaults and a repossessed house.
Decreased Net Worth
It has been observed the total net worth of people with student loans are lower than their counterparts. The reason is limited ability to make a massive investment because of hefty instalments. Also, the loans are difficult to get approval to buy real estate and other assets.
No True Freedom
Your decision to accept a job offer is based on the finances not to pursue the dreams. You cannot afford to have a job with an NGO for the public welfare. Every major life decision may involve the thought of loan repayment after graduation.
Also, the standard of living might not be the same as expectations. A lot of responsibilities accompany the increased income after graduation with a loan. This may lead to a life in the absence of financial freedom for a very long time.
Low Credit Ratings
Again, the credit history is about to take a hit because of the hefty student loan. You may miss some payments over the years because of various reasons. The credit history will display them as irresponsible conduct from your part.
A instant loan in Ireland will only be available from the private lenders. They serve borrowers regardless of their credit profile. However, the interest rates will be slightly higher for short term loans with instant decision.
House mortgage and car finance have an escape by handing over the keys of collateral to the bank. The same is not true for quick instant loans as most of the time. There is no collateral involved. Your consignor or guardian is responsible for the repayment if you miss the payments.
There are specific options, such as the government’s student loan forgiveness scheme. But they are tough to avail for an average student. The bankruptcy court will also rarely consider the plea to write off the student loan for the bankrupt professional.
Disqualification from the Interview
This may sound extreme, but organisations these days are conducting a credit history check for the applicants. Majority of them are for the upper management job while only a few conduct credit checks for every profile. The purpose is to check the level of financial education the applicant has received over the years.
Your missed payments and defaults will reduce the prospect of a good job in the big corporations. You may lose some great offers that could have made the whole financial condition stable. However, these opportunities come because of the higher education attained with the help of the same loan.
High Default Rate
Students loan is a long-term financial liability that has an average tenure of 10 years. It is common to have some financial troubles during this time, such as medical emergencies and unemployment. This is the reason why a vast number of student loans ends with a default from the borrower.
To sum up, a student loan helps brilliant scholars with some level of certainty in their plan. The middle-class population with no backup may experience difficulty managing the loan for years. Therefore, consider the loan only if you have a solid repayment plan.