Hi there!
I feel that the decision u will make will depend on factors such as the interest rate and your risk appetite.
If you're able to generate more than the interest rate on your debt, then you shouldn't use it to pay off the loan, but instead invest that lump sum to generate more returns that will not only offset the loan interest, and u get to keep the excess returns.
Depending on the interest u must pay, the type of financial instrument u will need varies, from the average high yield savings account to high yield dividend stocks. The risk of the investment is something u must consider.
If u are unable to find an investment that can effectively cover the interest payment, or u are unsure of the returns, u are better off clearing the loan and minimizing the interest paid.
Something u must take note of is whether u will need this money for other reasons. It is not very good for example to use your emergency savings or savings set aside for other purposes to clear the loan as your cash position may become very vulnerable. If u have money leftover after having a strong emergency fund, u can then use it to repay the loan.
Also some loans charge fees if you repay early. Do take this into account!
In general, being debt free is good but some debt is ok and shouldn't be rushed to get cleared as u can leverage it to generate returns.
A bit long winded, but I hope this helps yr decision making process.
Hi there!
I feel that the decision u will make will depend on factors such as the interest rate and your risk appetite.
If you're able to generate more than the interest rate on your debt, then you shouldn't use it to pay off the loan, but instead invest that lump sum to generate more returns that will not only offset the loan interest, and u get to keep the excess returns.
Depending on the interest u must pay, the type of financial instrument u will need varies, from the average high yield savings account to high yield dividend stocks. The risk of the investment is something u must consider.
If u are unable to find an investment that can effectively cover the interest payment, or u are unsure of the returns, u are better off clearing the loan and minimizing the interest paid.
Something u must take note of is whether u will need this money for other reasons. It is not very good for example to use your emergency savings or savings set aside for other purposes to clear the loan as your cash position may become very vulnerable. If u have money leftover after having a strong emergency fund, u can then use it to repay the loan.
Also some loans charge fees if you repay early. Do take this into account!
In general, being debt free is good but some debt is ok and shouldn't be rushed to get cleared as u can leverage it to generate returns.
A bit long winded, but I hope this helps yr decision making process.