Are you one of those people who are crazy sick about thinking over and over again regarding their best way to pay student loans? Are you also stuck between making a decision to either pay off your student loan or Invest in a profitable deal? Well, guess what you are not alone. Making financial decisions is so tough and tiring that we all become a little extra anxious during this process. However, as challenging and tough this question is, trust us by the end of reading this piece of thread you will be all set to make your tough choice.
Well, as we all know student loans are scary, and paying them off is tough. Moreover while applying for a student loan we all thought the first thing we will do after getting a job is paying off that loan. But the reality is a little different, isn’t it? Aren’t you a little too excited about investing in that profitable deal you are thinking about? Or you are too stressed to pay off this loan yet you don’t want to lose an opportunity to earn a fortune?
To be honest financial decisions must not be taken in the heat of the moment. In other words, your emotions should not direct your financial decisions. Therefore we are here with a few factors that you must keep in mind while making your decision. These factors are as follows:
Invest as well as pay off your debts
Who said that you can pay off your debts as well as invest a little chunk of your money to a profitable deal? Guess what the answer is Nobody. An individual can easily invest a portion of his income in a profitable deal such as make a fixed deposit or buy the shares of a profitable company and more. Whereas simultaneously he or she can also pay off his debts on a monthly or biweekly basis.
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Paying debts on a biweekly basis is quite easy. You can pay a significant portion of your debt as well as keep some emergency money with you. As you never know when and how you might need it. Moreover earning high returns on your investment on a monthly basis can help you to earn some significant side income too. Paying off debts as well as making money sounds great, isn’t it?
Check the rate of returns on investments and interest rate
An individual must always check the rate of returns on investment before investing his or her money in any deal. Sometimes it seems like a profitable deal however when you actually take all the facts and figures together it doesn’t turn out to be a significant profitable deal. Moreover in the current scenario if the rate of returns on the investment is higher than the rate of interest that you have to pay for your student loan then you have your answer right in front of you.
Invest your money in a profitable deal and with the rate of return on such investment pay off your student loan’s interest. Therefore over time slowly and steadily you can pay off your student loan once and for all.
Forgiving student loans
Before making an important financial decision an individual must research about the number of instances where the individual’s state government has forgiven the student loans. Sometimes due to sufficient funds and other sources of income state government or the central government take the efficient and effective step of forging student loans.
There are two kinds of scenarios where the government forgives the student loans of an individual. The first criteria are on the basis of income based repayments and the other criteria is individual’s job.
If in the individual’s state there are various instances of a government forgiving the student loans then he or she must not worry too much and invest his money in a retirement scheme. However, an individual must really think this through before making any final decision as forgiving the student loan is entirely in the hands of the government. Moreover, there is no guarantee of the loan being forgiven.
Type of Loan
An individual must also consider the loan that he has availed. If the loan has been availed by an individual from the government then the rate of interest on the government provided loan is 5%. (mostly) Therefore, you can easily pay the interest rate on your loan from the rate of interest from your investment. Moreover, government loans are easier to pay off. In case you are having a hard time paying off the entire loan, you can appeal to the government to avail you some benefits.
However, in case your loan has been availed from a private institution or source then you must pay off your loans first as the rate of interest on a private loan is comparatively higher than the government loan. Moreover, private loans are tougher to pay off and involve more risk. Also, the chances of private loans being forgiven are very rare and are almost impossible.
Consider tax benefits
We are not sure if you know that paying off your student loan debts gains you a benefit of taking a deduction of a significant amount from your taxes. It means if an individual pays their loan on time then he gets to save a significant piece of his income while paying taxes. Sounds great, isn’t it?
The government encourages people to pay off their debts in time therefore for truly promoting taxpayers the government provides them some great benefits on paying their loans on time. Therefore you get to release your stress by paying off your loan as well as get tax credits and save money.
On the other hand, don’t forget about the tax benefits that you will receive on investing in some great investment deals. For example, the government is currently encouraging people and emphasizing them to invest in retirement benefit schemes. Therefore you can also avail of tax credits if you decide to invest your money in a profitable deal. This way you gain a rate of returns on investment as well as save money from tax credits too.