Student Loan Repayments!

[Matt.]

Well, this is another of my ever so exciting 'real life' threads

Anyway, i got another student loan letter today... they're going to start wanting repayments soon (April) so i need to work out what to do I have a 5-figure loan...

Repayments work like this: 9% of anything over £15,000 earned is what you repay each year (that's the minimum). So if you kept up minimum repayments you're unlikely to pay the loan off (it's written off after 25yrs). Ideal you say! the interest on the loan is only 2.4% (!!). BUT the question is, do i pay minimal repayments and have the loan for a LONG time, or do i pay large chunks of it off and get rid of it (but massively reduce my savings)? The problem with having the loan comes when looking for mortgages for example, where it drastically reduces what i can borrow

Any ideas? Some of you might even be in the same situation, or have gone through it and have some good advice?


(now to wrap Christmas presents and sort things for my parents party!)

 

[Marcel]

Well since I've left Uni I've always been under the threshold for deferring it. So until such time I earn more....I keep deferring it.

 

[minimeeze]

I'd be tempted to pay off what you can afford, so if you can afford to pay off a little more each month, then do so. Although the interest is very low, and it's tempting to just pay off the minimum each month, like you say it can affect future credit like mortgages etc.

You don't necessarily need to pay off large chunks and eat into your savings, just increase what you pay back each month, so if you can afford to pay back an extra £20 - £50 each month (for example), the debt will be cleared alot quicker.

 

[h.r.ford]

I would say that a student loan is not "bad" debt. As the interest is only 2.4% it is well under what your money could be making you in other places. So put your money to better use invest it in an ISA or such thing and then if you want put lump sums later but on the whole your money can be better spent investing and saving. That doesn't mean a Wii is an investment!

 

[Matt.]

I would say that a student loan is not "bad" debt. As the interest is only 2.4% it is well under what your money could be making you in other places. So put your money to better use invest it in an ISA or such thing and then if you want put lump sums later but on the whole your money can be better spent investing and saving. That doesn't mean a Wii is an investment!

The problem comes when i come to buy a house for example, and need a mortgage... This debt makes quite a BIG difference on the amount i can get

 

[Steep]

Having no debt is bad as far as loan/mortgage companies are concerned, they have no way to know wether you are a good risk or not. Better to pay what you can in regular payments, those guys love people who do that and will much more readily lend to you if and when you come to need it.