Is Clearing Your Student Loan Early A Good Idea?
Updated on September 12, 2019
Paying a student loan is becoming a massive challenge for many graduates. With any kind of student loan hanging over your head, federal or private, it becomes near impossible to accomplish any of your financial objectives such as having a beautiful house or saving retirement funds among other long-term goals. However, accepting the reality and inviting your student loan into your home like an old friend or a family member to stay for long is still a big mistake.
You cannot treat a student loan like a mortgage; it’s not easy to get one with low-interest rates. Here are the pros of paying your student loan early and quickly.
Low Debt-To-Income Ratio
This means you will have more money when you want to invest either in a house, car or anything you want. Clearing your loans early means you will not be committed to any end month payments. This will give you an excellent opportunity to start investing and building on your wealth. It’s a basic knowledge which many people tend to overlook and regret years later.
The Loan Is Virtually Inescapable
It is the uncomfortable truth that many people have to live with. Those who succumb under pressure hopes declaring bankruptcy will offer the solution. The only way out is either one dies or becomes permanently disabled; otherwise, you will still have to clear your loan. Paying student loan early will help you deal with any financial crisis in the future. This is highly recommended because once you hit a spell of bad luck, getting to the top with a student loan gets much harder.
You Will Save Thousands Of Dollars In Interest
The same way you cannot carry a credit card without paying interest is the same way you cannot have a loan without interest. The longer you wait, the more the interest accumulates. Most student loan interest rates range between 6% and 8% – so if, for example, you borrow $20,000 with an interest rate of 3% on a period of 60 months, that will accrue around $1,500 in interest, making for a total loss. The sooner you wipe your loan, the better.
You’ll Be Happier
Carrying debts from month to month is mentally and physically exhausting. Everyone has his or her comfort level when it comes to debt. If the thought of a small debt overwhelms you, it advisable you clear the student loan in full if you are in the position to do so. In many cases, it offers not only financial freedom, but mental as well.
It is good to pay the loan while you are still enjoying the training and time you invested in it. After a while, the feeling does fade and the loan starts feeling like a total waste of money which clouds your head. Contact us today for more guidance on how to clear your student loan.