Student life is tough on many people, especially those with financial challenges. If you’re in the same boat, you may have signed up for student loans to get through your student life without feeling deprived of any of its perks. College students can find student loans quite helpful in setting their career path right by assisting them financially through their higher education.

While the word “loan” may sound intimidating, being able to use student loans is a feel-good experience in its way. If you do well during college and the initial years of your career, you can not only payback these loans, but you can also make more money later in life.

However, student loans also affect your good credit score and all linked financial matters, so you need to tread carefully while borrowing. Here’s what you need to know in this regard:

What Happens When You are Late to Paying Student Loans

When you file for a student loan, it impacts your credit score in two ways. The first impact comes immediately after you send a loan request and occurs in the form of a hard inquiry. The three big credit bureaus can order an inquiry into the details of loans, including amount, resource, installments and so on.

The other way a student loan shows up on your credit report is in the installment section of your report. This one takes up about 10% of the calculation among other loans, so the impact is mild on your credit score. The good thing is only filing for the loan isn’t enough to impact your score.

However, late payments on your student loan can have a lasting negative affect. Late payments are the most destructive element of your credit report. If you want to help avoid these, you should:

1. Pick Your Installment Payments Wisely

Whenever you apply for a student loan, you’re going to get multiple installment and repayment options. It’s best to take your time in picking your choice.

2. Borrow as Minimally as Possible

Although higher loan amounts can help you, it’s best to keep your expenditure and borrowed amount to a minimum, since that can be easier to repay.

What to do if You Can’t Pay Your Student Loans

If you unable to repay student loans, that can certainly show up in your credit report and may also ruin the hard work you’ve done to maintain your credit scores otherwise. If you’re unable to repay your loans for whatever reason, here’s what you can do to help minimize the consequences:

1. Ask for a New Installment Period

If your installments have halted mid-process, you may ask your lender to reconsider the installment contract and accommodate it so that you can make the rest of the payments when it’s financially possible for you.

2. Arrange for Collateral With Your Lender

If you have a car, some small investment, or any other asset that you can afford to let go of temporarily, you may also strike a collateral deal with your lender. This way, it shows the efforts you’re making toward repayment.

Being unable to repay your loans sounds awful, but it isn’t inevitable. When you apply for a student loan, it’s a good idea to set aside specific savings for the repayment later on. If the amount is large, you may also consider passive income streams to accumulate the amount faster, such as bonds or side hustles.

How Student Loans Can Positively Impact Your Credit Scores

Surprisingly, student loans don’t always negatively affect your credit scores. Borrowing a student loan helps establish credit. And, if you pay back your loans within the due period, that’s easily a positive for your credit scores.