Debt is often a necessary strategy to attain your personal and professional goals. How you handle that debt will have an enormous impact on your life – including your practice's success. Responsibly paying off student loans, credit cards, and auto and home loans may help you secure financing for your facility and practice equipment. In fact, payment history is the largest factor affecting your credit score.
Student loans can come from a variety of sources and have different terms and details. But they all have one thing in common; they must be repaid. Repayment usually doesn't start until after graduation. Stay informed on the details of your loans so you will be prepared to begin repayment.
Depending on the source of your loan, there may be several options for repayment including:
- Standard repayment – a fixed monthly amount usually over a 10-year period
- Graduated repayment – lower monthly payments initially and increasing gradually over a 10-year period
- Extended repayment – allows certain borrowers to extend the repayment period up to 25 years
- Income-sensitive repayment – monthly payments based on the borrower's annual income
- Deferment – allows eligible borrowers to postpone payments for a specific period of time
- Consolidation – lowers monthly payments for borrowers with either high monthly payments or loans from multiple lenders
Some student loans specify a grace period, which generally is six months following graduation. The grace period may vary on different loan programs and should be specified in your promissory note. If you are unsure, call or email the lender and ask for the loan disclosure and a repayment schedule. The loan disclosure will tell how much you've borrowed and what the monthly payments will be under a standard repayment plan.
Remember: Deferring student loan debt repayment increases your interest expense. And, student loan debt cannot be discharged in a bankruptcy.
Protect your future by protecting your credit standing. Use credit cards wisely, and look for a card with the lowest annual fee and fixed interest rate.
There are many valid reasons for using a credit card. It can be helpful to use in emergencies, to track business expenditures or to cover some expenses while you wait for payment from third-party insurers. The danger is using credit cards to pay for a lifestyle that is in excess of your income. Be wary; overuse of credit cards can get you in trouble if you are not able to pay off the balance each month or in a short period of time.
There are many resources available to help you become educated on credit card management, understand options for use and repayment, and help if you are in a bad situation with credit card debt. Being well educated will help you make sound decisions and deal with decisions you've made in the past.
Credit card issuers are required to disclose the cost and time it would take to pay off your credit card balance if only the minimum monthly payment is made, which can be quite insightful.