I am aged 23 and make £48000 a year. I have 2 sources of debt at the moment, my student loan and a mortgage I have just entered.
Student Loan Details:
Amount: £42775.54 Interest Rate: 5.4% Monthly Payments: £167 Term: 29 years until destroyed (At current salary, increasing annually at rate of inflation will pay-off in 26 years time)
Amount: £223,125.00 Interest Rate: 1.84% (First 5 years fixed), 4.24% (Variable after first 5 years) Monthly Payments: £724.16 (First 5 years), £982.43 (Thereafter) Term: 35 years
I currently save about £750 a month which I put straight into a savings account at 1.5%. I think it is fair to say that on average over the next 35 years I will save about £1000 a month.
I am keen to pay off my debt rather than put money into a savings account.
My question is this: If you were in my situation which debt would you pay off first - The student loan or the mortgage? (or neither and continue savings)
The rate on the student loan is higher, but the monthly interest accrued is higher on the mortgage as it is a greater amount.
I know this thread is now closed but as a supplement I have simulated paying monthly overpayments on my student loan for the remainder of its term at different overpayment amounts, thought this might be of interest to people so here were the results:
Parameters: - Starting Salary = 48000.0 - Salary % Increase Per Year = 2 - Loan % Interest = 6.3 - Starting Loan Amount = 42775.54 - Loan Term Remaining = 29 years