Credit Card Debt or Student Loan Debt: Which Is Worse?
Okay, so you have some student loan debt and some credit card debt, but which one of the two is really worse for you to have? As you make payments to both of the amounts you owe, you may reasonably start to wonder how each one affects your credit.
It is important that you do understand how these options affect your credit score overall, especially if you plan to use your credit down the road to purchase a car or secure a home loan.
Let’s take a look at these two types of debt now.
Student Loan Debt
When people refer to student loan debt, they do not often talk about it in a negative sense. For instance, people know that many college graduates have student loan debt, but it does not have as much as an impact as credit card debt.
Student loans are just as scary as credit cards because it does mean you are borrowing money and you will have to pay the money back.
One reason that student loan debt can be scary is because it will stick with you and continue to haunt you until you die. This is no exaggeration either. In fact, you cannot get rid of your student loan debt unless you pay it off, qualify for a loan forgiveness program, or you die. In rare cases, it may be dismissed in bankruptcy court.
You do not have to have any type of credit to receive a student loan, which is a benefit for those students who need financial aid, but have not had the opportunity to earn a credit score.
Student loan debt, is better than credit card debt when it comes to the flexibility, interest rate terms, and payment period. If you have a federal student loan, you will find that you have a variety of protection and options in case you are unable to pay on your loan. There are many federal programs that can help you if you face trouble and you can also refinancing and consolidate your student loans with many companies.
Credit Card Debt
Credit card debt is formed when you receive a line of credit and then charge debts to it. It is usually recommended that you stay away from a credit card unless you have the ability to pay the debt right away.
When referring to debt as a whole, credit card debt is worse than student loan debt. In fact, you will find that a lot of credit card debt will hold you back and it can prevent you from purchasing a new car, it can affect your credit ranking, and more.
Credit cards usually have a much higher interest rate compared to a student loan. In fact, it is not uncommon to see an interest rate on a credit card of 15% or even 25%.
If you make only the minimum payments on your credit card statement, you will find that you can never climb out of the debt. The reason behind this is because the interest rates will continue to add onto what you paid plus more, leaving you drowning in the debt you are in.
The only good part about a credit card debt is that it can be discharged during bankruptcy court, should you find yourself in that position.
If you are trying to determine which debt is worse, by far it is credit card debt. You should work to pay both off, but try and eliminate your credit card debt first.
