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Can I Pay Student Loans with a Credit Card?
Would you rather owe money to your student loans or to a credit card company? It seems like the answer would be obvious. Student loans are supposed to offer lower interest rates and be a safer type of loan to debtors. If you start to go into default or if your student loan gets sold off to another company you may be better off moving the debt to a low interest, or no interest credit card. But is this even a possibility?
The short answer is yes, but it is important to understand the benefits of moving your student loan debt to credit cards as well as the risks involved.
Consider the Interest Rates & the Terms
Many students get caught up in the extra income they can get form their student loans and often take more than they really need. Unfortunately, many of the private lenders have interest rates as high as some credit cards. Another thing to consider is the fact that student loans are considered to be federal loans and are subject to much harsher treatment if you ever need to file for bankruptcy.
Currently, the interest rates for student loans can be as high as 7.14%. If you have good credit, your credit card interest rates can be much lower than that.
Don't Transfer Student Loans with Bad Intent
Before paying off your student loans with credit cards it is important to think about your intent. If you plan on transferring the loans and makes their payments on time could really benefit and save thousands of dollars in the process. If you are intending to transfer your student loans and then file bankruptcy, however, there is a good chance you will be stuck with the debt again anyway. Bankruptcy judges are very aware of this strategy and will consider the intent of the credit card payoff during your bankruptcy hearing.
If you are looking to pay off your student loans and lower the interest rates - or even get away from going into default - using a credit card could be the right choice. Before doing so you need to look at the benefits from the payoff. Will paying off your student loans with a credit card lower your interest rates and payments? If the answer is yes, then it may be the right choice for you. Just make sure that you will be able to make your monthly credit card payments or you could end up with the student loan debt right where it started.
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