Invest or pay off debts?

Terrid_2

I really want to invest some of my cash , but am still in debt from uni and have been told, for example, that I shouldn't bother buying shares unless I have no debt (bar my mortgage).

So here's my question: is it better to just pay off my debt as soon as possible and throw all my available cash at that, or are there any assets available that I can invest in now that will help me pay off my debts?

Cheers

Terrid

lisyloo

Normally it is better to pay off debt rather than to invest, this is because

1) interest on debt is usually higher than you can get on investment - this is because the companies involved make profits.

2) some investments you need to pay tax on whereas you pay no tax when paying off your debts.

There are exceptions. Student loans from the governement are one because they are at exceptionally low rates.

What kind of debt do you have from uni?

Is it credit card, bank loan, goverment loan etc and do you know the rate of interest?

Also do you have any other cash available for emergencies (some investments require you to tie you money up and you need some cash available).

Terrid_2

hahaha, I've got all kinds of debt: student loan, credit cards, bank loans, mortgage.

It's not as bad as it sounds though - I used to have 4 credit cards, but I've just paid 2 off and am working on the other two. It's all coming down slowly, I just hoped there may be a way of speeding it up.

I hadn't thought about the whole tax thing. Dammit. I suppose i'm best just paying off the debt and playing the whole )% interest game by shifting everything round every six months or so.

Cheers

lisyloo

Many of your debts are likely to have higher rates than you would get by investing.

Basically look at all the rates and start paying off the highest ones first.

Usually credit cards would be highest (unless you have special offers) followed by loans (unless a governement student loan).

Once you get down to the lower rates of mortgages and student loan then it's worth reassessing, but in the meantime you are almost certainly better off paying off the expensive debts before investing.

Also if you really mean investing (as opposed to saving) then you are taking a risk with your money i.e. you can lose it.
It doesn't sound like a good plan to me to start taking risks if you have a lot of debt.

Terrid_2

cheers - will do.

terrid