To Repay A Study Loan Or To Accrue Savings?

When a student completes a course of study with a study credit, he usually asks whether to repay a study loan or start accruing savings for various unforeseen situations, as well as old age? To answer this question, we need to understand first what the interest payments are and how big they are for these student loans, and how profitable it is to save money and what the different savings are, and how fast is it possible to grow your money in this way?

 

Credit interest

Credit interest

Interest rates on loans are many and varied, but usually creditors indicate the percentage of how much the debtor will have to return to the bank for issuing the credit over the year. For example, if a study loan of 10000 Euro is taken and the interest rate of a study loan is 5%, then in a year the person will have to pay 500 Euro or 42 Euro per month, but every year this amount will decrease, because, for example, when crediting with a pledge there are still only 7000 Euro left, then in the year there will be overpayment of 350 Euro, or about 30 Euro per month and this amount will decrease with each payment. Usually, the loan interest amount is recalculated once or twice a year and if a decreasing payment schedule is chosen, then with each calculation these interest rates will decrease. In contrast, if a single payment schedule is chosen, it is distributed over the entire loan repayment period and will be the same at all times unless additional payments are made to repay the principal amount from which these percentages are calculated. Students need to understand that interest is calculated on the total amount of principal outstanding on the loan, and therefore when it comes to whether to repay the loan or to raise money, we are talking specifically about making additional payments for a faster repayment of the loan, as the monthly minimum payments are mandatory! The average interest rate for study loans is usually between 3% and 7%, but the average interest rate is usually within the 5% range, so this rate can also be taken as an average for different calculations!

 

Investments, or investments and savings

Investments, or investments and savings

Well, when we found out what the interest rates on study loans are and how these percentages are calculated we need to find out how it is with savings and money, and whether it is more profitable to raise money or invest instead of paying a loan? When it comes to average savings stored in a bank, these savings and term deposits have an average interest rate of between 0.1 and 3%, and as these rates are much lower than the interest rates on credit, if you can’t decide whether the money is so accrue or pay a loan, then every euro you give to a credit company will earn you at least 5 cents each year, if not more, because in the long run, your study loan rate will decrease and you will theoretically be able to pay less, but paying as much as you would pay off much faster! When it comes to investing in various securities, stocks, or companies, here the percentage return can be much higher than these 5% and often amount to 10% or even 20% per annum, but the risk here is also much higher as it invests in any company At the moment you can go bankrupt due to various circumstances and investing in stocks or securities, their value can also decrease drastically and you can lose money instead of getting it. But if you were thinking of simply saving money at home without a percentage increase, definitely investing it in repaying the loan would be much more profitable because you are simply at home, but you can repay the loan faster by returning it to the principal debtor and in the long run.

Not lose your money to the bank in interest payments! It follows from this that if you have a study loan and a big salary, and you think where to put the money left over, then a faster repayment of the loan will be the most beneficial solution, because after the loan is repaid the same amount you paid for the loan you can invest in stocks or securities, or build your own business and the like. A similar article on whether it is more profitable to repay a mortgage or to raise money read here.

Leave a Reply