A lot of people want to pay off their student loans early, but is it really the right thing to do? There are certain advantages and drawbacks associated with doing this that you should learn about. A majority of students in the UK have some amount of debt, and many of them are concerned about when to pay them back. This article will provide you with the information you need to make an informed decision.
YES: You’ll Have More Money to Put Towards Other Things
Those who pay their student loans off early will have more money to put towards buying a house, car, and other important things. You will also have money to invest, which is always a good thing. The sooner you take care of your student loans, the sooner you can begin saving for important life purchases. It costs a lot of money to buy a house, so eliminating your debt early on can work in your favour.
NO: Choose to Invest
Some people who have a particularly low interest rate on their student loans choose to invest the money they would have spent to pay them off early. If you invest intelligently, you could make enough to still pay your loans off before the due date. A lot of younger people are starting to invest, but you will need to be smart about it.
YES: Avoid Potential Problems Later on
If you suddenly become unemployed down the road, you could have major problems with making your student loan payments. By paying off your loans early, you will be able to avoid this potential nightmare of a situation. The fact is that you never know what the future holds, so it could be a good idea to err on the side of caution.
NO: Take Care of High-Interest Debt First
If you have other debt that you need to pay off with a higher interest rate, you should focus on getting that paid off first. It is always the high interest rate debt that gets you, so keep this in mind. Most student loans come with low rates, so you can afford to take your time with paying them off. There is nothing worse than having other debt with a higher interest rate, because it can do a lot of damage to your credit and finances over time.
YES: Peace of Mind
One of the best reasons to think about paying your student loans off early is that you will finally have peace of mind. A lot of people stress over these loans, so you will be putting a stop to that. Life is stressful enough without having to add on anything unnecessary or extra. The peace of mind that you get from having these loans behind you will make you a happier person overall. You might be surprised at how much better you feel when this debt is taken care of completely.
NO: Saving for Retirement
It is never too early to start saving for retirement. Even those who are in their 20s and 30s would do well to start putting money aside for their golden years. Every extra little bit you put towards paying off your student loans will be a little less you have for retirement. Those who focus on saving for retirement will be glad they did when the time comes. One of the biggest financial mistakes that millennials are making is not to taking retirement seriously enough.
Will I be Penalized for Paying My Loans Back Early?
Some people are hesitant to pay back their student loans early because they are afraid they will be penalized for it. If you have government student loans, you don’t need to worry about this. Those who have private loans for their higher education will need to know what the terms are like. A lot of private lenders do not charge any additional fees for early repayment, but some of them do.
If you will have to face a penalty of some kind for paying your loans back early, make sure you find out how much it will be. Paying your loans back before the due date could be worth it even if you get penalized. You might be able to work with the lender to waive the penalty fee, depending on how flexible they are.
How Can I Pay My Loans Back Early?
If you have decided you want to pay back your student loans early, you will need to figure out how you are going to do it. There are many different ways to do this, including:
• Refinance: You can always try to refinance your student loans to get a better rate if the one you have now is too high. This is usually an option that is best for people with private loans. There is no guarantee you will get a better deal, but it could be worth trying.
• Increase your payments: Raise the amount you pay on your loans each month, and eventually your balance will be clear. This isn’t a possibility for everyone, but it is worth thinking about.
• Supplement your income: Find ways to make more money until you are able to pay off your student loans. Sometimes supplementing your income can mean cutting back on certain things that you don’t need temporarily.
Should I Pay My Student Loans Back Early?
If you are very stressed over your student loans and want to gain peace of mind, you should strongly consider paying them back early. Those who are particularly interested in investing their money or saving for retirement might want to think twice. If you have other debt with a higher interest rate, you should make a point of paying that down first. This is a big decision that you should spend some time thinking about. Paying off your loans early might sound like an obviously good decision, but there are many different factors that need to be considered.