Other options?

Man-Alive

Hello - 1st post so be gentle with me!

Currently making the standard monthly payments (£73) towards my Student Loan (£4,000), after ignoring it for a few years. I was thinking of rounding up my monthly payments to £100 to get it paid off quicker.
Is this the right thing to do or would I be better off putting the £25 a month into a short-term savings vehicle hopefully to create a larger total sum that I can ultimately use to pay off some of this debt.

Thanks in advance.

Tootsie_Roll

I suppose the first question is: Are you being charged interest on the outstanding balance with Student Loan ? If not then you would be better advised to put the money into a savings account as with interest earned you will hopefully clear the balance quicker - assuming of course you are quite strict with yourself and don't blow the savings ! If however you are paying interest on the loan then you need to find out how it is calculated - was it all loaded on at the start, does it accrue monthly, are you paying arrears fees etc etc etc.

A very basic rule of thumb is to clear debts first as generally the interest rates are higher on borrowing than saving.

Hope this makes sense !

Northernbird_2

I don't know when you graduated and if it changed, but I know my student loans are dependent on whether I'm working and the wage I'm earning, so if I lose my job or my salary drops below a certain level I can defer my loan every 12 months until I meet the criteria again to repay.

If that's the case, don't pay off your student loan early until you've built up some decent savings (do people normally recommend three months salary for emergencies?). I know it must be tempting to pay more, but if you lost your job in 12 months time, you could have £300 extra in savings!

The interest is pretty low as well (3%?), so you're not accruing a lot of interest over time.

Man-Alive

Northernbird wrote:

I don't know when you graduated
.........................
The interest is pretty low as well (3%?), so you're not accruing a lot of interest over time.

I graduated in 1998, but I deferred my loan for years & only started making monthly repayments last year.
The fact that the interest rate on the loan is low (as you say about 3%), I thought if I opened an ISA that can earn me say 5% tax-free I could make my money work harder.

But as Tootsie Roll states the 'basic rule of thumb is to clear debts first' so maybe I should just work towards just getting the loan paid off directly.

Thanks for your replies!

skintchick

I think the advice meant you should save it - I definitely would as you will be getting more in interest than you are paying on the loan.