Repay Student loan in full or gradually?

Legacy_user

I was wondering if anyone could advise me about what to do with my student loan? I have just graduated from Uni and will be starting my career in September this year. Living with parents throughout Uni and also completing a paid work placement year has, along with money from parents, enabled me to accumulate a substantial amount of savings. I also took advantage of student loans by sticking the money into ISAs to earn more interest on the loan than I would be paying. £7,500 of my savings is the student loan.

In view of the fact that I am thinking about stepping on to the property ladder later this year, the question is would I be better off paying off my student loan now in full to avoid interest repayments or should I use the loan to reduce the mortgage by using it to put towards a larger deposit? I would still be able to put down a desposit without the loan but obviously the loan would increase the amount available for a desposit.

Many Thanks,

Reg, Sheffield

zcaprd7

What's the student loan APR versus savings APR?

Student loans are handy because they can be deferred if you lose your job (and your savings pile would also be v handy in that situation!).

In real terms they don't cost you anything, but many people seem overely concerned about having it 'hanging over them'?  

I believe that mortgage firms don't take them into account when looking at credit worthiness (not sure though?) and the saving you would make on a mortgage if you have a decent deposit could be huge....

BTW here's one trick for dealing with £1ks worth of student loan:

http://forum.moneysavingexpert.com/cgi-bin/yabb/YaBB.cgi?board=Students;action=display;num=1089632316

halcyon_drift

the simple answer to this is take as long as you can to pay off your student loan. assuming your 'substantial savings' dont accumulate to the cost of a house (which i gather you are planning to buy), the interest paid on a student loan will always win against the interest paid on your mortgage. I suggest stick with the student loan for now.

Halcyon

Leia_Stephens

I would concur, Reg.

Using some of your "substantial savings" - leaving a few £k as an emergency fund - as a deposit for a mortgage seems the way to go IMO as well.

I would like to be nosy and ask what amount of "substantial savings" are we talking about ???

Leia

zcaprd7

I have to comment that I don't think the government wanted you to gather interest on your student loans and then use them as a deposit for a mortgage - but well done anyway!

You'd be suprised by the number of more well off students (or ones with generous parents) who were scared of doing the same thing - some kind of middle class pre-occupation with not having debt - especially the girls?

Robert_Sterling_3

Do not pay it off early

trafalgar_2

Why are you shouting ..............had a bad day