Everyone says pay off debts before you start investing. Sounds good for credit cards & other high interest loans. But my £15K student loan is very low interest (Just above inflation).
Is it better to INVEST my money now e.g. bonds/shares/ ISA etc or is it better to PAY OFF my loan. With an investment that gave regular dividends I could maybe pay off my student loan faster than if I didn't invest. Any thoughts?
2007-11-15 23:03:54 · 5 answers · asked by Chico 3 in Business & Finance ➔ Personal Finance
cloud 7- £20K salary, Aim: most in medium-risk investments, the occasional high risk investment. £500 monthly to use and no other debts. I am fine with giving 6-12months notice before withdrawing money.
2007-11-15 23:27:11 · update #1
Generally it is better to pay off any debts before you invest as you are paying a higher interest rate. Student loans are normally at a lower rate, so maybe you can manage to do both at the same time?
But still, 15K is a lot of money. You will feel better once you are rid of the debt.
2007-11-15 23:09:11 · answer #1 · answered by L 7 · 0⤊ 0⤋
In normal circumstances I would say that to pay off debt first is always the right thing to do. However with a student loan the interest rate is very low so its much more difficult to be absolutely certain. It really comes down to how comfortable you are with having a large debt outstanding when you balance that against the fact that interest rates in the UK are headed down. The difference between what you can earn in interest and what you have to pay is going to be narrowing all the time. In my personal case the outstanding loan is what I would tackle first but I can see that you could quite legitimately decide to save.
2007-11-16 07:20:29 · answer #2 · answered by JOHN R 4 · 0⤊ 0⤋
If your student loan is with the student loans company then my advice is to just forget about it completely. Don't worry about paying if off and don't try paying off more than what comes out of your salary anyway. Its low(ish) interest, will be wiped clear after 25 years (I think) if it is not paid off, and it does not go against you when you are applying for other credit e.g. cards, loans, mortgage. Its there, it gets paid off from your salary - apart from that there is absolutely no reason to worry about this kind of debt.
2007-11-16 07:11:00 · answer #3 · answered by Nicola 3 · 0⤊ 0⤋
see what the annual or periodic payoff is from your investments. will it rise with the economy? if it isn't more than 2% better, than you may want to pay off debt. remember, tax as well. do you get a break in taxes from your debt interest? if so, then that is a help to keep low debt and start saving/invest. good luck.
2007-11-16 07:16:01 · answer #4 · answered by 27ysq 4 · 0⤊ 0⤋
classic question.
do you have other debts? How much do you make?
what is your budget? All those answers will come into play when deciding about investing.
2007-11-16 07:13:19 · answer #5 · answered by cloud7 3 · 0⤊ 0⤋