Many people today want to have their own business. Unfortunately, they may also have a crippling amount of debt in the form of student loans. The good news is that you don’t have to give up on your dream. Even with student debt, you can still create a successful business.
Facilitating the Process
There are a few things you can do to make the process easier. For instance, consider deferment and forbearance. It’s a good idea to know how they affect your debt from school. Forbearance lets you quit making payments on a loan for as long as a year. Just remember that interest might continue accruing. Deferments are similar since you won’t have to make payments on your loans. However, you usually have to meet a few requirements first, such as being unemployed or being enrolled in school. Since deferment may affect your credit, you can still take out a loan for your small business if you go this route. It will show up on a credit report, but it will be neither good nor bad. Just remember that it’s best to apply for deferment before your financial situation declines, so you don’t miss a payment.
Getting Startup Funds When You Have Debt
Many times, startups need an initial investment so they can get started. The money is designed to cover the cost of equipment, employees, space, and other needs. The initial investment also allows employees to be paid before the company begins to pull in money. Of course, marketing to start generating sales also costs money. Even if you can create a careful budget, you’ll still need some funds, whether in the form of a small business loan from a bank or help from friends. Companies will eventually have a business credit score. However, in the beginning, whether or not you get a loan depends on your personal score. That’s another reason to ensure you take care of your student debt first.
Reducing Your Student Loans
If you have a good credit score and want to get your loans paid off faster, consider refinancing. If you get a lower interest rate, you won’t pay as much in the long run. The process involves taking a new loan out to pay off the current one. Often, the new one comes with a lower interest rate, especially if your credit is better now than when you were in school. It’s best to calculate how much you expect to save before you choose any one lender. That way, you can maximize your savings.
If you have federal student loans, you may have more options open to you. For instance, if you do not want to have to pay as much each month, look into an income-based repayment plan. The amount you send each month is based on how much you are earning. If you do not have a high income in the early stages of your business, you might not have to pay very much on your debt. Just remember that the interest continues to accrue.