Repay your student loan or save money?On August 17, 2019 by admin
Studying is one of the most important stages of a person’s life, because not only do you learn your life profession, but you also often meet your best friends and the next half. However, many study years have more to do with student loans and the high fees that will have to be paid after graduation. So is it worth considering whether to pay off these loans right away, or maybe save money first and then start paying off your student loan?
Most people will definitely think that they have to pay off their loans first, whether they are study loans or other, before they can start to save money. By doing simple calculations and looking at savings and loan rates, it may seem like this is the best strategy because once you get rid of your credit, you will have more free funds to save. But in reality the situation is not that simple. It is definitely not worth making such a big financial decision simply by looking at interest rates, as each person’s situation may be different – it may be more profitable to repay the loan before saving, and the other might be better off making small savings first and then start repaying the loan. . Therefore, to help you make such a difficult decision, here are some of the pros and cons of saving both before and after your loan repayment.
Savings after loan repayment
- One of the biggest arguments for deciding to make such a decision is definitely the fact that saving money recently has very low interest rates, which may make it seem more profitable to pay off the loan with its high interest rates first and then start accumulating.
- For many people, saving is a cushion in the event of a sudden dramatic deterioration in their financial situation. However, experts say that these savings often provide a false sense of security, so in most cases, you should pay off your loans first and then start saving. And when you run out of credit, it will create a real airbag and a clean credit history.
- Of course, an emergency fund is not bad, as it always gives you the feeling that even in the most dire financial situation, you will be able to get out of it. However, even if you accumulate this fund for a few months, your interest on the loan may rise so high that you will have to pay it back for an even longer period. That’s why it’s usually better to pay off your debt first and then you can safely save money.
Storage before repayment of the loan
- But on the other hand, savings can also be very valuable in certain situations. The aforementioned emergency savings fund can come in handy in many different ways because you never know what will happen in life.
- Such a small savings fund, often in the current economic climate, is also very important because banks tend to suddenly cancel loans to their customers that can put your whole life in the air, and then you will only be happy to have the savings you can use to continue your life at its usual rhythm.
- But if your loan interest rate is very low, then it is more than normal and even desirable to slightly delay the payment of this loan and save money, especially if you have the opportunity to open a high interest rate savings account, in which case stability, but after that you will still be able to return your student loan to the bank.
Whichever option you choose, remember that you have to make that decision and only you can understand what your financial situation is and what you should do first. But if you still can’t decide, there is a golden middle ground – systematically repaying even a small percentage of your credit each month, while making even a small deposit into your savings account. Perhaps not everyone in their financial situation can make that decision, but if you still feel confident about your income, you will both slowly repay your credit and color your money. Doesn’t it sound great?