3 benefits of paying off your student loan early
Updated on July 27, 2020
Once you graduate, you will experience many financial responsibilities that can be challenging to manage, including your student loan debt. Unfortunately, many students don’t worry about student loan debt until six months after their graduation.
Additionally, some put off student loan repayments, and they end up carrying their debt throughout their adult life. While deciding between paying off your student loan early and saving can be difficult, you can significantly benefit by focusing on the former.
Here are three benefits of paying off your student loans early.
1. A lowered debt-to-income ratio
This is the amount of debt you have compared to your overall income, and having a lower debt-to-income ratio means you have more disposable income. Therefore, you can put more money into your savings or start making major purchases.
Also, lenders prefer clients with a lower debt-to-income ratio, making it easier for you to buy a house or a car.
2. Pay less overall
Since loans have different interest rates and terms, you may end up paying more in the long run when you choose to wait. For example, private student loans have a higher interest rate, which can accrue over time, increasing the overall amount you owe.
Alternatively, federal student loans offer affordable monthly repayment plans that only provide short-term financial relief. In the long run, your student loan becomes more expensive. Hence, it’s wise to pay off your student loans early.
3. Get rid of financial worry
It’s no secret that any debt, be it credit card or student loan debt, can cause financial stress and worry. Furthermore, it can strain your budget, forcing you to cut down on your spending, e.g., moving in with a roommate to save rent.
To avoid financial worry, create a debt repayment plan that helps you clear your student loans as early as possible. You can also use other payment options such as student refinancing and student consolidation, as they can help you pay off your student loans faster.
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Contact StudentLoanify today to learn more about student loan debt and student loan repayment plans.