As many college students go through the rigors and necessary steps to finish their educations, once they're done and successfully graduated, they know it's time to start their own, independent lives. With school out of the way, jobs on the horizon and a bright future ahead many will be seeking to purchase their own homes – if not right away, sometimes down the line. Going with the assumption that students will in fact buy a home within a 5 year span of graduating, they're probably also looking to satisfy their student loan balances within that time frame. Here is where opportunity lies.
If such a situation exists for you, where student loans need to be paid and you now own a home, there is a way in which you can use your new home to pay off your student loans. How, you might ask? Well, it's simply a matter of using a home equity loan to pay off your student loans, and quite quickly too.
Shortening Student Loan Payoff Through A Home Equity Loan
It's no surprise that most students coming out of college feel that paying off their student loans will be a long haul. Yet, to your delight, as many other students', there is a quicker solution to rid your self of student debt – through managing your debt responsibly and considering using a home equity loan. Considering here is mentioned purely because because a home equity loan to pay off your student loans is a two-sided financial action, having both ups and downs, defined pros and cons.
Take Into Mind Home Equity Loan Perks
When looked at and reviewed initially, it would seem that consolidating your student loans into a home equity loan would be a wise decision, one with little to think or worry about. This is so due to how home equity loans work. Since these types of loans are essentially use your newly owned property as collateral, banks are able to offer much lower rates than the majority of what private student loans would. This is a saving grace, in more ways than one. Financially, you'll save literually thousands of dollars (via long-term interest payments), not to mention benefitting from added tax perks. And better still, in terms of lowering your total expenses, home equity loans are tax-deductible.
But, Also, Consider The Pitfalls of Using A Home Equity Loan
It's clear that utilizing a home equity loan to pay off student loan debt is beneficial, yet it is still a bold and weighted move. Know that using a home equity loan is not 100 percent without caution. Firstly, it's paramount to mention again that your house is used as collateral, which could have been to your detriment, especially if rough times unexpectedly pop up, which could cause you to have to default on your mortgage. This could cause you to lose your home, which would be an awful thing to deal with.
And also, factor in that you will lose the deduction that comes with student loan interest, despite earning a tax deduction for the paid interest on your home equity loan. The ideal thing to do here is to calculate, by crunching numbers, which loan option would best suit you in the long run. Make sure that you understand your options, as well as the ups and downs of home equity loan use to pay off your student loan balances.