It has become commonplace to graduate with student loans. Many people we see today have student loans weighing so heavily on them that they’re afraid to even move out and on their own after graduation.
You might be wondering if you can include paying your loan in your debt payment plan or if you can consider clearing it off as soon as possible.
The truth is, consider paying your student loans first. It is the best course of action, and here are the reasons why.
It Lowers Your Debt to Income Ratio
This is one good reason that you should consider paying off your student loan; first, it reduces your debt to income ratio. This means that when it’s time to buy that car or house, you will have money available to you.
There will not be any commitment to having to incur an additional payment every month. It frees up your money so you can use it in other ventures and build wealth. The less money you pay to clear the debt, the more you have to invest in your business.
Have You Considered the Tax Break?
One common myth about student loans is that you have to keep them for the tax break. This gives you enough reason to put the debt at the end of your debt snowball, but have you considered how much interest you will deduct each year?
Close to $2500.00, and that is quite a large amount. Either way, you will still have to pay taxes or interest. Why not get rid of the loan instead of hanging on to it just for a measly tax break?
How Much Does the Student Loan Cost You?
Have you deducted the majority interest and considered how much you would be losing each month because you have this payment? What if you invest in a mutual fund? Wouldn’t this be a smart move?
Even with no interests incurred, at the end of the day, you are losing some earning potential of the amount you are paying each month. If you did not have to worry about the monthly payment, you would be able to save quickly for that business dream or even work towards other goals.
You Cannot Escape a Student Loan
Most people paying student loans probably think that bankruptcy might offer a solution to this problem. However, whether you file bankruptcy or not, you will still have to pay back this loan. There is no escape route.
The only way out is if you become disabled permanently or die. If you hit a spell of bad luck and lose your job, it will be quite difficult to get back to the top of your game. Paying off your student loan early makes you better equipped to handle other financial issues later on in life.
It Helps You to Stop Worrying About Money
You can never have peace of mind when you are in debt. If you want to enjoy your financial life, consider paying off your student loan first so that you can concentrate on other things like investing.
Whether your loan is at the end of your payment plan or not, you will benefit from working on getting out of this debt and reducing the amount you owe.
If you have that student loan, you are better off paying it first, rather than holding on to it and incurring more in interests, which will cost you in the long run. Paying off your debt will not only give you a confidence boost but will also allow you to focus on investing and building wealth.