There is a common belief that consumers need to pay off their student loans as fast as possible. Although it's true that repaying debt quickly reduces long-term costs, you may have other debts that should be paid off more urgently than your student loans.
As soon as people graduate, their bid to clear their student loan debt is often uppermost in their minds. However, credit cards normally carry a far higher interest rate than student loans, so while people strive to pay off their student loans, they are often crippled by higher credit card interest. In these circumstances, it may be better to clear your credit card balances before tackling your student loans.
Financial expert David Metzger suggests that financial planning should be placed as a higher priority than loan repayments. "An emergency fund and taking advantage of employer-matching [retirement] contributions should almost always take precedence over paying off student loans," Metzger says.
If you are concerned about your level of debt, it is essential to work out what you owe and the interest rates that apply to each account. Calculate which debts are the most costly and should be paid back first, and look over your monthly income and spending habits to see where you can cut costs and add to your debt management plan. Doing this can save a lot of money in the long run.
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