Investing student loan lump sum

hatu

Hi all,
Recently finished University and payed for my own tuition fees whilst keeping my student loan (1998-2011 rate) in a notice account. I've now got a lump sum of around 18k. I closed the notice account as the interest rate had been slashed, and I'm wondering whether to
a) repay the loan as a lump sum and enjoy the lack of deductions from my paycheck
b) invest the lump sum somewhere else

Any thoughts on the matter? And if I go for option b, any good accounts out there? Unfortunately it seems the notice accounts are a lot less attractive than they were a few years back..

Cheers!

steampowered

Hello, I prefer option b.

You will probably find that you can get a better rate of interest on your savings (or as an investment, for example in a stocks and shares ISA) than you are paying on the loan.

The other point to consider is whether you might want to buy a house in a few years? If so, you'll need a deposit so access to 18k cash is much more useful than paying off your student loan.

Mogley

I was fortunate when I was buying my first house (2004) that my parents offered to pay off my student loan (just over half of your amount) or contribute to a deposit on my first house. I chose the deposit contribution to get on the property ladder ASAP. This has worked out well for me. I'm in a better position now on the property ladder than I could have been by saving the money from the lack of deductions from my "paycheck" due to the house price rise between 2004-2008.
I am still paying off my student loan now (1 year left) and still see it as the cheapest, low risk and best form of debt I'll ever have.
Like steampowered suggests, I would use your £18k to get on the property ladder as soon as you can.

hatu

Thanks for the advice so far. Any thoughts on a good place to keep the lump sum in? I was thinking of notice accounts, but those interest rates have plummeted the past couple of years..

george4064

What interest rate is your student loan at?

hatu

What interest rate is your student loan at?

1.25% (starting in 1998-2001 bracket)

hatu

So, any thoughts on places to keep the lump sum (ideally in its entirety rather than splitting it up into several smaller investments)?

george4064

hatu wrote: »

So, any thoughts on places to keep the lump sum (ideally in its entirety rather than splitting it up into several smaller investments)?

I suggest taking a look through the top saving accounts here: http://www.moneysavingexpert.com/savings/savings-accounts-best-interest?_ga=1.87911384.1520529563.1465125727

hatu

I suggest taking a look through the top saving accounts

Can't really find anything that can counter the 1.5% interest due on the loan savings accounts- wise unfortunately.. Perhaps bonds?

george4064

If you can't find saving rates greater than 1.5% then I give up!

(Check the current accounts available, eg. Nationwide, TSB, BoS, Tesco)

xylophone

One way (interest at 3%).

A couple of Tesco current accounts (1500 in each) and three BOS Vantage - open a couple of Tesco Savings accounts for the two DDs you'll need on each Vantage account (which can be internally funded by same day SOs between the accounts). The DDs can be set for around the amount of the monthly interest arising on the Vantage accounts.

Move the money out of the Tesco savers into the current accounts.