Paying Off a Student Loan in a Lump Sum
Paying off a student loan in a lump sum is something most of the people with college degrees wish they could do. But unless you've got a rich relative somewhere or walked straight into a dream job with degree in hand, the process of paying off a student loan will take years, if not decades. The moment where you can pay off that student loan with a lump sum may not happen until you're dangerously close to senior citizen age. But when that day comes, it'll be a grand one for sure. Those years you put in paying down the loan can be culminated with one single payment. At that moment, it won't matter if your hair has gone gray or you've lost it completely. It's a piece of your life that can be put behind you, and it's one less payment needed.
But back to now. If you've gotten down the loan payment to the point where one payment will clear the debt, then you should do it. However, you should know that a student loan is considered good debt. If your rates are higher for, say, other things you've financed (say, a car or more importantly, a mortgage), then it's typically considered good form to keep paying the loan until the payments are finished instead of getting rid of the debt in one shot. As you will find out from meeting with debt consolidation agents, this will only improve your credit rating. Sure, it's annoying not to want to get rid of all that debt at once if you can. But it may be good for your credit rating if you're looking to cement that application for a mortgage. The banks will look kindly upon you, even if the extra interest annoys you every month.
Other Reasons To Pay Off The Loan
While it's important to know that the credit report you get either way will be on your record for at least ten years, so that improved credit rating can only help you in the future when making big purchases. That said, there are logical reasons to pay off the loan as soon as possible. For one, the interest payments will just disappear. Wouldn't that be nice not to have to deal with those anymore? Secondly, it'll be a huge load off of your bank account. With the loans gone, you can pay the important bills. Like the big trip you and your spouse are planning to celebrate the true end of college. With that in mind, it's easy to see why some people want to get to the fun stuff in life and leave student loans behind, general financial advice be damned.
That advice lays out some pretty compelling reasons to keep the payments coming. Your credit report will be better, your financial history will improve. But there's just a part that most of us who have been through college and open our mail every single day dread. That enormous monthly bill in the mail that you wish you could get rid of. So it's pretty easy to see why someone would just want to make it go all away. You can use that money for other things more pressing than reliving good and bad college times. And you won't get any more annoying phone calls from the people at the college fundraising committee! You may love your alma mater with all your heart, but if you're still paying out to the lender every month, the last thing you want to do is donate more to the college. By paying student loans as lump sums, all that can go away.
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