You ask this question so often that it is easier for me to answer it here.

The question usually sounds like there is so much student loan or whatever, I could pay it off because I have savings, but is it worth it?

The answer is very simple: how much interest do you pay with your management costs on your existing loan?

This is 8-9% for student loans and 6.5-7.5% for state-subsidized home loans.

How much interest will you get on your current savings?


The typical interest rate is now under 7% and you still need to deduct the interest tax.

That is, if your student loan has an interest rate of 9% and you do not receive an interest on your existing savings before interest rate tax of 10.71%, or if your mortgage loan has an interest rate of 7% and you do not receive 8.4% on your deposit, your credit.

Because it makes no sense that you get 6% from your bank for your deposits and you ask for the same bank loan for 9%. Because in this case, the bank will lend you your own money at a 3% surcharge.

In fact, next year, you can also pay the transaction tax on your loans, in addition to interest tax.

Of course, do not put all of your money into a loan repayment, as the six months’ subsistence must always be sufficient .

But always use your money above to pay off your loans first

But always use your money above to pay off your loans first

Because I believe that it looks good on your bank statement, that you have five million in savings, but that is only virtual assets if you have 20 million in the meantime.

In that case, you lose $ 150,000 a year in paying more on the loan than you get on your savings (if the interest rate differential is 3% after interest tax)

This is throwing a monthly average net pay out of the window for nothing.

(There is no prepayment fee for student loans, typically 1-1.5% of the amount repaid prematurely for a home loan. Even so, it is usually worth it.)

This article is about not needing money elsewhere


If you are just about to take out a 12% home loan or 30% personal loan, then of course, do not repay the 8% student loan so you can borrow more expensive. Just like when you need to borrow money for your business, don’t repay it.

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