Michelle Singletary takes a look at this question and has an intriguing answer: think of paying off a debt as a risk-free investment with a guaranteed return, equal to the interest on the debt.
That is a simplified way to look at money management: paying off debt is just another investment.
It all depends. The last few year I would have said pay off student loans because interest rate were low (ie. no return on bonds) and stockmarket was flat. But now that interest rates are increasing and stock market is starting to grow again it may be time to start looking at rates of return of investments compared to your student loan repayments (espcially if you have a fixed interest rate for your student loan).
ReplyDeleteThough personally the faster you can get out of debt, the more free you will feel to take risks with investments, and potentially have greater returns on investment.
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Pay the loan off first. The interest you pay could never be matched by the interest you would be paid with an investment.
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