Financial advice

[Electric_Andy]

Can someone help me out please?
I've just paid off the remainder of my student loan, £2289. I was paying 1.1% interest on it.

First question, the interest works out at about £25. Would I have been paying this amount monthly or annually?

I'm thinking now I don't have the £56/month coming out of my salary, I might now have to pay more tax and NI etc? Just don't know if I'd have been better off paying it off monthly, but it's done now. I'm glad to see the back of it!

 

[MntnMan62]

Well, unless you were investing the money that you used to pay it off, you did the right thing. Lately investing in stocks would have been better than paying the loan off. I have earned 8% on my investments since the beginning of the year thus far. But if the money was just sitting in a bank account, it would have earned less than the interest you were paying on the loan. So, you are ahead of the game. And psychologically it's nice to know you no longer have to worry about that. From here on out, the only debt you want is a mortgage on a house or investment property, a loan for a business venture and maybe a car. You definitely do not want any credit card debt. That's the worst. Pay off your cards every month. You should never have more than an amount you can pay off in two months on your cards at any time. Those interest rates a killers.

 

[Electric_Andy]

Yes agree. I don't use a CC any more, apart from if I'm buying something big online which benefits from having more protection. But i always pay it off each month. I don't like having debts, but having a student loan since 1999 sort of became a hidden "went to Uni tax" in my head.

Just interested as to whether i was paying 25 quid (and more on higher balance) per month or was it per year?

 

[MntnMan62]

Well, the 1.1% rate is per annum. So, each month you paid 1.1% on the balance you owed that month plus some that went towards principal. If you only paid interest on a loan balance of 2,289 pounds, you would have been paying a little over 25 pounds a year in interest. But since you were paying some principal with each payment that reduced the balance over time, the amount of interest you would have paid each year would have been less than 25 pounds.

 

[Electric_Andy]

Ok thanks

 

[Gunk]

I can’t understand what you would pay it off, it’s effectively just additional tax, you have no obligation to completely pay it off

 

[MntnMan62]

I can’t understand what you would pay it off, it’s effectively just additional tax, you have no obligation to completely pay it off

What happens if you don't pay it?

 

[Electric_Andy]

I paid it off because i have saved up some money over the last year. And at this rate although interest is minimal it would take a number of years to pay it off, given that £56/month is taken from my pay check. I'm not earning anything on my savings, so might as well save £2/month and get rid of the debt.

Nothing happens if you don't pay it off, when i wasn't earning much i didn't have to make payments.

I guess it was a silly thing to do but at least I've not got any debt now, and if interest or salary brackets change for the worse then I'm safe.

I'm just glad i wasn't paying loads per month on interest; i thought it was much more

 

[Buck]

The

Can someone help me out please?
I've just paid off the remainder of my student loan, £2289. I was paying 1.1% interest on it.

First question, the interest works out at about £25. Would I have been paying this amount monthly or annually?

I'm thinking now I don't have the £56/month coming out of my salary, I might now have to pay more tax and NI etc? Just don't know if I'd have been better off paying it off monthly, but it's done now. I'm glad to see the back of it!

The interest rate on student loans is an annual figure so 1.1% of £2289 = £25.18 interest per annum / £2 per month.
The repayments are taken after tax/NI so you should see an increase in your disposable income of the £25 per month.
Just check that you’ve got confirmation that the loan has been fully paid off as a couple of my friends had errors on their acco7nts and the student loan company kept taking money from them!

 

[midlife]

Are they still written off after 30 years?

 

[Gunk]

What happens if you don't pay it?

its deducted at source once you reach the earning threshold. After 30 years it’s written off.

 

[marinyork]

No advice, but well done, that's quite an achievement!

 

[nickyboy]

It's always tempting to pay off loans if you have the cash. However, it's an unsecured loan with an interest rate well below the market rate

If I was asked my personal opinion on this I would say you should have kept the loan and just accepted the repayment schedule. You never know when your circumstances change or when you may need that cash. For sure you couldn't borrow that cash again at those sort of rates. But you've paid it off, so there you are

 

[Electric_Andy]

It's always tempting to pay off loans if you have the cash. However, it's an unsecured loan with an interest rate well below the market rate

If I was asked my personal opinion on this I would say you should have kept the loan and just accepted the repayment schedule. You never know when your circumstances change or when you may need that cash. For sure you couldn't borrow that cash again at those sort of rates. But you've paid it off, so there you are

Yes that's what I'm thinking now. But it has been done. I can confidently pay that back into my savings within 8-12 months. I might pay more tax now that my salary has increased, but as long as the extra tax doesn't exceed the £60/month that was being taken out, I won't mind. It's a good psychological boost; my friend got a good job and paid his off 10 years ago, so in some way it makes me feel better now that I'm not borrowing from anyone.

 

[nickyboy]

Yes that's what I'm thinking now. But it has been done. I can confidently pay that back into my savings within 8-12 months. I might pay more tax now that my salary has increased, but as long as the extra tax doesn't exceed the £60/month that was being taken out, I won't mind. It's a good psychological boost; my friend got a good job and paid his off 10 years ago, so in some way it makes me feel better now that I'm not borrowing from anyone.

In the overall scheme of things it wasn't a huge sum of money so it was probably worth it for the psychological boost. It's sometimes too easy to see these things solely in terms of £s

But as a general piece of advice, if you can access unsecured loans at low rates of interest then it is often advisable to repay only the minimum allowed and keep the cash for a rainy day (ie don't fritter it away). We all have rainy days