Apr 10, 2017 05:34 AM EDT
Student loan debt has always been an obligation for fresh graduates. In the recent years, this obligation has become a burden especially with the high interest rates and inflation.
In Nerdwallet's report, someone asked how to become an entrepreneur when they are still paying off their student loans. It makes sense since running a business has a lot of benefits like being one's own boss, setting one's work hours as well as being able to help the world become a better place.
However, those who want to become entrepreneurs should also think about the startup costs of starting a business. Student loan payments take away a big part of one's cash flow. Moreover, it is more challenging since fresh graduates are still starting out.
A history of missed payments can also affect credit score. Banks check both cash flow and credit scores when processing small-business loan applications.
This does not mean, though, that fresh graduates cannot start a business until they've repaid their student loans. The publication shared strategies that young professionals can employ to manage debt burden to be able to save money for their own company.
Lower student debt
Cash flow is important when starting a business. One way to free this up is to cut the monthly student loan bill. Fresh graduates can make use of the federal government's income-driven repayment plans by capping federal loan payments based on one's income.
Aspiring entrepreneurs should also make sure that they understand the difference between consolidation and refinancing. These are two different processes that can help them manage their student loans.
Be faithful in loan payments
Never miss a loan payment because, as mentioned earlier, this can affect one's credit score. Lenders will use this information when considering small-business loans.
Nicole Beltz, a graduate of Delaware Valley University, was able to start her business and pay her student loan balance at the same time. She said that the school loan did not become an issue because she made it a part of her budget. Graduates can also opt for monster payments where graduates take on more extra work and pay their loans quickly.
Plan the business well
It's always good to find free or cheap ways to test whether the product or service that aspiring entrepreneurs will be providing has a market. Afterwards, write a business plan that includes the projected sales and revenue.
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