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Should I pay off this loan?
Tastyfish
Registered User regular
Registered User regular
So yeah - I've just got my first proper job after graduating from my MSc, which will now puts me with enough income that I have to start repaying my student loan of around £10,000. Now this amount seems pretty scary to me, however when talking to my parents they pointed out that the rate of interest on this loan (3.2) is less than the interest rate for my current and savings acount (each with about £3000 in each - 6.5% on the first £2500 and 0.1% on the rest for the current account and 3.66% tax free for the savings account) - hence that its not worth paying off more of this than the bare minimum since I'm not technically losing money on the interest once my wages start and I'll never be able to borrow money at such a good rate again.
This seems a bit odd to me, but is it right?
This seems a bit odd to me, but is it right?
Tastyfish on
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My savings account is close to 4%, and I have another higher interest loan for $11,000 which I'm going to pay off immediately when I graduate, and then take as LOOOONG as possible to pay off the remaining loan.
Only makes sense to make someone elses money work for you for a while.
What kind of loan did you get at 1.98%? I have access to usaa, too, but I've never seen them offer anything that low before.
I'm pulling down 5% with WaMu's online savings, and was getting 4.5%+ with ING.
To the OP: it's gonna depend on the tax system in Britain. Are payments made on the interest on the loan tax-deductible? Are you in a bracket where what you're paying on the interest from the savings makes up for what you're making over the interest on the loan? Are payments made on the principal of the loan tax deductible?