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Should Parents Pay off their Child’s Student Loan?

Parents are often very protective over their children and will help them wherever they can. This means that they could help them financially as they approach adulthood as well as helping them in many other ways as well. It is natural for them to care about their offspring and want to help them.

Parents who have children that want to go to university or have been face the problem of student loans. It is likely that if they went to university, they would have received a grant to cover their course fees and some of their living expenses and so they were unlikely to have needed to borrow money to pay for it. It can seem rather unfair that things have changed and you may feel that you do not want your children to bear the brunt of this change.

However, it is worth understanding a bit more about the UK student loan scheme before you worry too much about it. The repayments on the loan do not have to be paid until the graduate’s salary reaches a certain level and it will then be taken out of their tax code. This means that they will not have to make formal repayments. After thirty years the debt will be written off and they will no longer have to make any more repayments. At the moment a quarter of students have not repaid all of their loan by the time they reach that thirty year threshold and often they have not repaid what they borrowed let along any of the interest. Therefore if you repay the loan when your child graduates, you may be paying back far more than would be repaid if you left it and let the repayments be taken out of the tax code. Of course, if you keep the loan for the full term, then you will end up paying back more than if you paid it back early, because of the cost of the interest. However, chances are that the full amount will not be repaid anyway. If your child takes on a really well paid job as soon as they graduate, then it is more likely that they will end up paying back the full loan and more worthwhile considering whether to pay it off.

As well as whether it is financially viable to repay the loan, it is worth considering whether it is good for a parent to pay off their child’s debts. Although it can feel great to help them out, it may not be sending the right message to the child. They may feel that it is okay to borrow money because their parents will be able to pay it back for them. It could lead them to become more careless with their money. Obviously you will know your child and how they tend to be with money. You will know whether they are likely to borrow a lot of not. Obviously, some borrowing is good, such as a student loan or borrowing to buy a home, but if they start borrowing money for all sorts of reasons and think that it does not matter as parents will help out, this can be tricky. It is likely that you will not always be able to help them out and then they will get stuck as they will not know how to properly manage their money so that they can make the necessary repayments on their own.

It is also worth considering the effect on other family members. If you have more than one child and end up helping one out a lot more than the others then there could be jealousy between them. This could make your relationship with them awkward or their relationship with each other. It could even spread further than direct family with other members asking for money, should they need it. Also if the parent has to turn down a request for money, perhaps because they do not have it or because they do not agree with what it is being spent on, then this could cause problems as well. It may seem like an easy decision, to give your children an easier start in life, but it is worth thinking about the consequences of that before you go ahead and help them.

Best ways to Finance a New Car

If you are looking to buying a new vehicle, whether it is a brand new or second hand one, you will be likely to be paying a significant amount of money for it. This means that it is a big spending decision and worth thinking hard about before you go ahead.

The best way to pay for anything is usually to use savings that you have already. This is because they are convenient and free. You will not have to organise a loan with anyone, which can take time and also you will not have to consider the costs of the loan and work out how you will repay it. Once you buy the car, you will not have to worry about the cost of it. Some people may worry about using their savings, thinking that they might need them to fall back on in the future. It is an understandable concern, but it can save a considerable amount of money if you do use them and so it can be worth it. You may be able to fall back on your overdraft or credit card if you really need to and otherwise you can start saving up again and will hopefully have enough to feel comfortable very soon.

Many of us do not have enough money saved up to pay outright for a vehicle when we need one. If we have some savings though, it can be worth thinking about putting those towards the cost of it, for the reasons outlined above. You may have to finance the rest of the vehicle using an alternative method. If you have time, it could be worth considering whether you could save up for it. Obviously if you need a new vehicle immediately then this may not be possible. It may be that you are replacing a vehicle that can no longer be driven and therefore cannot wait, but if you are just considering buying a new vehicle but still have options which work if you do not get one, then it could be better to wait and save up the money that you need, so that you do not have to borrow any.

If you do decide to borrow, whether it is the full amount of a percentage of the cost, then you will be wise to compare all of your options. It can be tempting to use the loan offered by the car dealer but this might not be the best option for you. Although it will be convenient, as you can buy it from the same place as the car and you may even be offered a discount if you use their finance, there could be cheaper options available. It is worth doing some research and seeing what you can get before signing anything.

It is likely that you will need to borrow a significant chunk of money and if this is the case, you will be most likely to need a personal loan. These tend to have a regular repayment requirement and so each month you will need to pay interest as well as a chunk of the loan off. How much you have to pay each month will depend on how much you borrow and how long you repay the loan over. It is really important to make sure that you are happy that you can find that amount of money to repay each month. It is good to consider how much you normally have spare at the end of the month and whether this will be enough to make the repayment If it will not be enough, then you will need to either have the loan for a longer term so that each payment is smaller, but end up paying more in interest or figure out how you can earn more money each month or spend less so that you have the money that is needed.

It is well worth comparing the rates on the different loans to see which is the cheapest. By doing this you could save a significant amount of money. It is worth noting that the interest is not the only money you will be paying out. There may be some administration fees as well. You may be tied in to a certain period of time if you take out a fixed rate and if you want to switch lenders or repay early you may have to pay an early redemption fee.