There are many reasons why a student may wish to take up loans. Sometimes, these reasons appear very logical at that time. However, time eventually reveals that the borrowing decision is actually a bad one. First, let's take a look at the conditions where borrowing decisions are made.
Peer pressure.
This is not uncommon in a study environment. Everybody seems to be out of money, and everybody seems to be borrowing. On the surface, it looks like it's perfectly alright to keep borrowing and borrowing and borrowing. However, nobody ever talks about repayment.
After all, the subject of being in debt is a sensitive issue. It is tabooed and hardly anyone brings this subject up in conversations. As a result, young and impressionable students just follow blindly without giving much thought to the future. So they take up loan after loan, unaware of the troubles that are brewing in the horizon.
Aggressive advertising.
This approach is often taken by private institutions looking to make a quick buck. Student loans offered by private institutions like banks often come with low interest rates. But this doesn't mean that the banks don't make money by providing these loans. They can offer such low rates because the interest rates are heavily subsidized by the government. That means somebody will be paying the bills.
This is a lucrative market for banks. After all, students are not as savvy as working adults when it comes to managing finances. So it's much easier to convince students to take up loans - even those that they don't need.
However, it is important to note that pointing fingers and blaming the banks won't help the students. After all, they are the master of their own financial destiny. And they have to make the right decisions. The key here is to be educated about these student loans, so that students can make the right decisions for themselves.
Borrowing out of a genuine need.
This is where it takes a lot of discipline. Keep in mind that money is never enough in a student's life. So the temptation to borrow more is great. Very few are able to borrow money solely based on what they need. In fact, most do not think twice about borrowing because they are over optimistic. They think that they will get high paying jobs when they graduate and are blissfully unaware of economic downturns and recessions, which eventually lead to painful retrenchments.
To avoid making this mistake, do a reality check. If you are considering taking out a loan, ask yourself if you really need this money. Are there any alternatives? For example, can you do a part time job to give yourself more school allowance?
Remember, every little bit of money counts. If you borrow bit by bit, thinking that it's a small amount, you will soon find yourself drowned in debt. You will then need to engage the services of student loan consolidation service providers.
This is unnecessary if you can approach borrowing with a prudent mindset. This mindset will serve you well throughout your life, even when you graduate and step into the working world.
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