Should I pay off my Student Loan?

[Deleted User]

glentoran99 wrote: »

Student loan payments don't count against a mortgage,


The interest rate is less than borrowing the money on a mortgage so pay it as a deposit

I know that.. but they dig into personal finances a lot these days; so it's still worth considering.

I'd also keep the cash and use it on a deposit - like you said, the rate on a student loan is so low it rarely makes sense to pay it off.

Pixie5740

You need to live somewhere so you either pay rent or a mortgage (unless you're fortunate enough to be mortgage free, or are one of those "failure to launch" people). Rent or interest on a mortgage will cost you more than the 1.5% interest you are currently paying on the student loan.

In your shoes I would put the £8k towards a house deposit and then pay down the mortgage as quickly as I could before overpaying or paying off the student loan.

bsms1147

glentoran99 wrote: »

Student loan payments don't count against a mortgage,

They are counted in terms of your affordability, so yes, they do impact mortgage applications.

I have lots of student debt (at 1.5%, soon to be 0.9% APR), but as long as I can get better rates on savings, I will only pay the minimum. If I were you I would keep the money as savings and put it towards a mortgage deposit when you need it.

Muhren

I would, well did use mine for a deposit. I think if your are looking at it purely from a financial perspective then you should use it towards a deposit. However if you would feel more comfortable not having any debt (other than the mortgage - before some pulls me up) then go for that.

northerner999

I considered the possibility of paying off a chunk of my student loan a few years ago, but decided not to and instead used the money towards the deposit for my flat.

Had I paid off the Student Loan Company I would have needed a larger mortgage due to a reduced deposit - in effect re-borrowing the money I had paid off, except at a higher interest rate, with far less flexibility and secured against my home.

For me it was a no brainer to decide against making the SLC payment, which I think was vindicated by student loan interest rates remaining lower than mortgage rates.

Jon_B_2

The student loan is as such that it gets wiped away after a certain time if you don't pay it all off.

Stop looking at it as a traditional debt and more of an additional 9% tax rate. I would never sacrifice a house deposit for such a pathetic "debt".

By the way, it will impact on your mortgage in the sense of affordability. I currently pay £180/month so not insignificant.

immoral_angeluk

Miss_FinancialHappiness wrote: »

I think its psychological with me knowing that I do not owe any money once it is paid off .

I am currently paying it off each month, so I guess the amount is falling every month .

The additional income would be great, it would feel like a payrise! so again i keep thinking about that

I think people underestimate the psychological benefits sometimes and only see the 'black and white' side of things. Owing nothing is a huge weight off your shoulders and the relief of that does wonders for you mentally and physically.

You have to do what will make you feel the best. Yes ok interest is higher on this that and the other but when you're talking a minimal difference in the long run, go with what makes you happy.

Muhren

immoral_angeluk wrote: »

I think people underestimate the psychological benefits sometimes and only see the 'black and white' side of things. Owing nothing is a huge weight off your shoulders and the relief of that does wonders for you mentally and physically.

You have to do what will make you feel the best. Yes ok interest is higher on this that and the other but when you're talking a minimal difference in the long run, go with what makes you happy.

That isn't very logical though as you won't be in a position where you owe nothing, you will just end up having a larger mortgage at a higher interest rate.

immoral_angeluk

Muhren wrote: »

That isn't very logical though as you won't be in a position where you owe nothing, you will just end up having a larger mortgage at a higher interest rate.

There are some people who don't consider student loans as debt, some who do. There are some people who don't consider mortgages as debt, some who do. It all depends on the OPs perspective. With the reduction in the student loan repayments it's possible that the OP could save the money spent on clearing the loan after a while to make up for it anyway.

Only the OP knows their full circumstances and how it would affect them financially. My point is mainly about how sometimes the psychological effect can be equally worth any possibly financial gain from doing something differently.

Life is too short to concern yourself with ifs and buts unless you absolutely have to.

Muhren

I can see where you are coming from but it doesn't make much sense to me as you still have the same amount of debt which ever way you slice it up.