Student Loan Got You Down? Pay it off Faster! A formal education is a “must-have” these days. It is surely one of the best investments in your future success that you can ever make. But the prospect of paying your educational expenses during your student days when you may not be earning much (if anything at all!) can be daunting.
Taking out a student loan is an option that may allow you to put off paying those expenses until a time when you actually have an income. But remember, student debt can feel like a dead weight around your neck for years to come.
Consider sooner rather than later how you can quickly pay off your education loan and be satisfyingly free of debt. A year at university, for example, can cost an average of SGD 8,760. To help you afford your education and pay for fees like tuition, books and living expenses, you may consider applying for a student loan. Student loans generally offer more affordable repayment conditions compared to ordinary non-student loans.
You can find more information about this type of loan here. In spite of the relatively easier repayment methods and lower interest rates, paying off your student debts can still be a major financial burden. Partial or late student loan repayments can mar your credit report and damage your credit score, making it difficult to qualify for other types of loans such as mortgages and automobile financing. As such, it’s best to pay off your student debts as soon as you can.
Related: Effects of Inflation and Steps to Protect Yourself Here are 4 tips to help you pay off your student loan quickly once you’ve got that degree in hand.
- Read your repayment guidelines and pay particular attention to the fine print.
You need to know when and how much you need to pay back every month. Take note of all the details surrounding your student loan agreement including the total loan amount, interest rate, processing fees, minimum monthly instalment, the term of the loan, etc.
There may also be administrative charges such as disbursement fees, late payment fees, cancellation fees and repayment fees. If you remain timely and consistent in paying your monthly instalments, you generally don’t have to worry about these extra charges. However, it’s still a good idea to be familiar with the details about them.
Identify the total amount of your loan, the loan repayment period, the minimum instalment that you need to pay every month and the schedule of your monthly repayments. Now take that information and set up your personal budget.
- Create a personal budget, and stick to it.
Setting a strict but practical budget is a significant step not only in clearing your student loans but also in being financially independent. Gather your bank statements, credit card statements, utility bills, loan statements and other financial records, and total up your monthly income and your monthly expenses.
A budget can help you re-evaluate your expenses and help you increase the amount you’re able to tuck away and save every month. Separate your “needs” from your “wants”. You may need to cut back on what you spend on your “wants” – things like luxury items – to pay off a student loan more quickly. Make a few sacrifices for a limited period of time until you achieve your financial goal.
- Know your repayment schedule and pay instalments on time.
You may have different options for your repayment plan depending on the type of student loan you have, as well as the financial institution that has issued you the loan. For example, some banks allow you to pay monthly instalments towards the principal loan amount and interest while you’re still studying.
If you think you can squeeze some part-time jobs into your schedule of classes and personal life, you can pay off your student loan debts that much earlier. The second option which some lenders allow is required monthly instalment payments of only the interest on the loan for the period when you are still studying.
This type of repayment plan is ideal for full-time students who do not have the time to earn money on the side while studying. The monthly instalment payment on the principal loan amount starts only after graduation. The third option available from some banks is to start paying off any part of your student loan after you have completed your studies. RHB is one bank, for example, that offers a deferred repayment option.
You won’t have to worry about paying anything during the period you’re focussing on your education. However, you will have to cough up higher monthly repayments after you graduate. No matter what your repayment plan is, remember to always make timely monthly payments. Even one single late payment can damage your credit score.
- Try to pay more than the minimum instalment each month.
Covering the minimum amount of repayment on your student loans each month may seem good enough, but it may actually be harming your financial standing. By spreading out your loan payment over a longer period, you are effectively extending the duration of your debt.
Aside from that, you may also be paying a larger sum due to a higher interest rate. It is an excellent idea to make large loan repayments while you are still young. Once you start a family, for example, you may become swamped by other significant financial obligations such as mortgages and car loans, and you may have a harder time setting aside money for your student loan repayment.
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