Is it better to pay off student loans quickly?

Question

I'm graduating this June and I'm going to have about 30,000 canadian in student loans. I want to pay off my loans as quickly as I can even if it means sharing a room with someone. I'm planning to take at least 50% of my pay check to go into loans. So maybe around 900 a month, which allows me to pay off my loans in about 3 years. I'm normally a saver anyway and I can live cheaply. I would have just enough money left over for rent and living expenses. My rent would only be about 400 dollars. Plus, I have savings right now that would work as my emergency fund. Do you guys think that it's a good idea and is it worth it financially? My thought is that it would save me on interest even though it would be hard for a few years, but I will be much better off in the long run. Any suggestions?

Answer 1

Its always good to pay down debt

Good Luck!!!

Answer 2

I agree with you on paying the loans off as soon as possible. Why carry a debt for years and pay all of that interest?

But like you, I prefer to pay things off as soon as possible. When I got my 1st house (back in 1975), I almost passed out when I saw my amortization schedule. I was making a $300/month payment - but the amount owed was only reduced $19.97 (rest was interest). After a lot of argument, the bank finally agreed that I could make extra principle payments. I made 2 extra per month (About an extra $40 at first, but slowing go up each month). That house was paid for in less than 15 years (as oppose to the normal 30 years).

I'm now 55, been retired for 2 years - I could not have retired without the house being paid for. :=)

The sooner you pay off your student loans, you can get into other things.

Answer 3

To answer that question you need to consider two things:
1. The rate of interest on your loan and
2. the rate of interest on savings and investment.

In other words, if the interest on your loan is higher, you may want to pay that off first, but ensure that you can pay it off earlier. Some institutions do not permit early repayment, believe it or not.
If your savings gives you higher interest, save your money, make the required payments on your loan and pay it off over the specified period. It also builds your credit rating. If you can, you should really consider investing the money while making loan payments.

However, if you are thinking of making a big purchase soon, like a house, the money you have outstanding does affect what they refer to as your "debt service ratio". In other words, they look at how much of your income goes towards servicing or repaying debts. You should talk to the institution and find out if you get any rebates for early re-payment.

Answer 4

Given the choice btwn paying off the loans or buying a house to live in as an investment, it is financially better to buy the house. the loans will help develop your credit rating and are viewed as honorable debt. buying the house will cost, but the house will appreciate at a rate faster than the interest will accrue on the student loans. not to mention that rather than paying rent to share space with someone, you can work out the house, rent out a room or two to students or friends who are responsible, and they can help or completely cover the cost of your mortgage, thereby allowing you to live rent free, gain on the investment in the house, and still pay a lot toward your student loans.

Answer 5

If that is the only loan you have then yes, it will be better to pay it off as quickly as possible. Make sure you have a stable interest rate or maybe negotiate for a lower one. DO NOT GET INTO CREDIT CARD DEBT....it will overwhelm your other loan. Good luck.

Answer 6

Better still, don't take one out. Something fishy about those.