Most likely, you have student loans to pay back, and like any loan, the quicker you can pay it off, the more money you can save. So, knowing this, should you prepay –or, in other words, make extra payments to reduce the balance of your student loans?
The quick answer is YES. There is no downside, but first, you need to figure out your budget – can you still pay on time all your other bills, like rent, utilities and cell phone? If the answer is yes, then you should make a prepayment. And don’t forget, you can prepay without any penalties, make a prepayment whenever you can afford to, and save money by reducing the total interest paid over time. Have more than one loan? Then focus on the loan with the highest interest rate.
And finally – and most importantly – if you decide to prepay your loan, you need to send a letter to your loan servicer, informing them that your payment is a prepayment. Otherwise, your prepayment might be credited against a future payment, rather than being applied toward your loan balance.
Credit follows you all of your life. It’s what enables you to get a cell phone, utilities, an apartment, and even a job. By paying your bills on time, you can improve your credit score and gain access to better financial products to get what you need in life.
RentReporters is helping the millions of renters to proactively impact their credit score by reporting on-time rent payments to TransUnion, one of the major credit bureaus. To learn more about RentReporters and how we can help you start building or improving your credit score, visit RentReporters.com.