Should You Pay Student Loan or Buy a House?
Student loans have become a way of life for most students to attain a degree. And, the number of students opting for this life is increasing. In truth, it has become not only a burden for students but also the American economy. And because of vast amounts of debt, more graduates are missing out on the joys of becoming financially independent.
More and more graduates are choosing to focus on clearing their debt, while others opt to balance between repaying their debt and accomplishing other goals— like buying a home. Buying your first house is a personal goal for many Americans. Yet, student loans end up affecting their ability to do so.
This article will explore whether it’s better to pay off your student loans or buy a house first. We will also explore if it’s possible to do both.
Pay Student Loans First
Some of the reasons why you should first pay off your loan include;
· Erasing your debt from your credit report. While student loan debt does not affect your credit score, it does have a percentage of influence in building your score.
· It prevents you from paying more interest. The longer you take to pay off your student loans, the higher the interest becomes.
· You get a sense of relief that comes from completely paying your debt.
· A tax-deductible limit on the interest paid
Yet, despite the benefits, choosing to focus on paying off can take a toll on your finances. And this can affect your ability to buy your first house.
In order not miss out on the opportunity of accomplishing the goal of buying a house, most graduates will opt to pay their student loans and save for their first home. However, this is something you should never take lightly, as it can be quite impossible to achieve without the right strategy. So, here are some of the things you can do to accomplish both goals.
1. List your debts: Apart from student loans, make a list of all the different types of debt you have—from credit cards to car loans. Then list the remaining balance for each loan.
2. Start paying debts with high interests. Clearing your high-interest debts allows you to save more.
3. Separate your savings: One of the best ways to avoid spending your savings is by keeping it in a different account. Opening a saving account ensures that you continue saving and at the same time, minimize the possibility of using it for other purposes.
4. Keep paying your student loans: Not paying your student loans is a bad idea, as this causes your interest rates to continue increasing. By making regular payments, you not only reduce the interest rates; it also keeps you on track to complete your loan payments.
Buying a house with the help of property valuers and paying off your student loan are both critical. And finding a way to balance the two can help you achieve your goals. You can start by cutting unnecessary spending and stick to essentials like utilities, rent, and groceries. This will help you save more and pay your debts as well.
You can also opt to work more hours or have a second job to help pay your student loans. But first, make sure you calculate your debt-to-income ratio. If your debt is more than your income, then you might need another job to clear your student debt on time. Also, ensure you track your expenses and create a budget. This will help you attain your financial goals more quickly and fast track you to become a homeowner.