5 Reasons to Start Paying Back Your Student Loans Early
March 17, 2020 | Mason Roberts
Studies show that student loan debt is an ongoing epidemic in America today, and just like any epidemic, it can throw your best-laid plans into disarray. This can make it hard to scrape together a plan to pay your own debt off, but it’s vital that you do so. Why? Here are 5 reasons:
- You pay less in interest
- Improves your credit
- Lowers financial stress
- Saves deferments for emergencies
- Allows you to plan ahead financially
Pay Less in Interest
The best way to minimize interest on your student loans is to pay early and consistently to avoid ballooning interest payments. This is because your monthly payments are set with the assumption you’ll be paying consistently and on time. If you take a deferment, within a month your payments will begin to increase, and the more you’ll have to pay each month in the long term.
Improve your Credit
Your student loans are reported and can impact your credit score. Even something as simple as requesting a deferment for a month will increase the amount of interest you owe, which in turn lowers your credit score. It will appear as a loan account growing without any payments going toward it for that month. It is imperative that you pay consistently and on time to avoid negatively impacting your credit score, which in turn can touch almost every part of your financial health.
Lower Financial Stress
Owing tens of thousands of dollars can weigh heavily on the mind. Wouldn’t it feel good to alleviate that stress? The only way to do it is to take the initiative and tackle it sooner than later.
Many graduates take the grace period of one year before beginning to pay back their loans. While this gives you a little breathing room, don’t let it go to waste. If you have the self-discipline, you should start putting away into a savings account each month the same amount as you would have to pay to clear your debt. This gets you used to budgeting with your student loan payments in mind and gets you ahead of the curve without actually committing to payments.
Related content: 10 Personal Finance Tips: Things You Should Be Doing And Why
Saves Your Deferments for Emergencies
A deferment request approval can help take the stress of loan payments off your shoulders for a couple of months but are not permanent. The more requests you make, the less likely you are to get approval. Deferments for things like unemployment only last for a maximum of three years. It’s better to wait for an actually financial emergency before requesting a deferment. Paying ahead allows you to rest easy knowing you won’t have to constantly request deferments and increase your interest.
Allows You to Plan Ahead
When you take into account your future finances, student loan payments must be a central part of them. Statistically, student loan debt is the type of debt most people are stuck with the longest, so it’s not as if it’s going to go away without a concerted and meaningful plan to get rid of it.
Get Relief from Financial Stress
Taking your student loan payments and paying them off sooner than necessary can be difficult without a consistent source of income. However, if you require emergency funds, consider a payday or installment loan from Mississippi Title Loans, Inc. today.