Student Loan Repayment - Sod It, I'm Doing It

LightbulbFlashing

Hello everyone, I'm lucky enough (and probably don't mean that in jest either) to be one of the class of 1998 to 2012 (I believe that's when the changes came in).

I currently have around £4700 left to repay, notwithstanding the approx £1600 that will come out after this financial year.

With interest etc, I'll be around the £3500 mark before I started my repayments again next financial year.

I contribute around on average £150 a month, which I am used to as I never see it, I am however sick of the loan now and plan to just get rid of it as soon as possible. Previously I have had credit cards and a bank loan that I have repaid, and no longer have. I have a mortgage, which I already pay an additional amount on (£90). The main thing I am saving for is a wedding, which is next year, which I put away £250-300 a month. I still have a bit of money after the bills come out on the first day of the month.

My logic is this: pay £100 extra a month - which will generate an additional £1200 by this time next year - a massive chunk and leaving me with a total of £3000 to take off next year, almost clearing the loan.

I then plan to divert the money that I won't be paying into the wedding, and then following that into the mortgage. I will continue to periodically review it every few months and may adjust it up or down when I need to.

I know it's only 1.5% interest, but it will help liberate me further, clear it away so I can use the money elsewhere.

Sound plan?

Anyone else doing this?

atypical

LightbulbFlashing wrote: »

I then plan to divert the money that I won't be paying into the wedding, and then following that into the mortgage. I will continue to periodically review it every few months and may adjust it up or down when I need to.

I know it's only 1.5% interest, but it will help liberate me further, clear it away so I can use the money elsewhere.

Sound plan?

It doesn't make sense to overpay. As you say, the interest is only 1.5% which means the value of your loan outstanding is currently being inflated away by around 0.5% a year. If you're going to overpay anything, it should be your mortgage.

Once you repay you will never be able to reclaim the money. The loan also provides the security that if you unfortunately lost your job the repayments would stop.

I didn't follow the points about diverting money. The amount of money you can save over say an x year period will be the same. You're just changing the timing of the cashflows.

nimbo

if there are no overpayment charges on your mortgage wouldn't you be better off paying the extra money into that as it will have higher interest on it???

jobbingmusician

^^^^^^ what nimbo said.

Have a look at the MFW board - it does seem to me (and I did it) that repaying mortgages early saves you about twice whatever you stick into the mortgage

The_Jakal

You will never have the opportunity to borrow money at such a low rate again in your whole life.

I second the others, you should pay off other debts such as mortgage etc first!

M0ney

I'm in the same boat as you mate, probably around £3000 left to pay and I'm getting ~£175/month taken from my salary. I have considered all options including overpaying but it simply doesn't make sense to overpay it. If you do overpay it, it will mean you are paying higher interest on your mortgage for longer and it will take you more time to have enough for your wedding.

setmefree2

Before starting to pay extra of your mortgage you should have at least 6 months worth of pay saved as emergency savings.....

LightbulbFlashing

Ok fair points guys - my new policy is to divide what I what paying into the student loan into half, half to go on top of my mortgage repayments and the other half to top up my wedding fund.

The_Jakal

LightbulbFlashing wrote: »

Ok fair points guys - my new policy is to divide what I what paying into the student loan into half, half to go on top of my mortgage repayments and the other half to top up my wedding fund.

Great choice. You'll be much better of for it!

Don't forget to put the wedding fund into savings