Should I start a business or pay off student loans?
I would like to save up a sum of money to start a business but conventional wisdom says I should put as much towards my debt as possible. My only debt is student loans and my mortgage, but its ALOT. Some advice?
Tags: business, Loans, Should, Start, Student, Student Loan
Do both. Work out a budget. I am in an online business that only cost ten dollars a month and I am making a small profit so far after only four months. It grows daily so I will be making more as time goes on. It’s fun anyways! I spend a few hours a day promoting it online. email me for details mark@homeforwork.ws
there is good debt and bad debt – both home mortgages and student loans fall under the category of “good debt,” credit cards and other personal loans fall under “bad debt.”
the reason your mortgage & student loans are considered good debt is that they both have relatively low interest rates, in most states their interest can be deducted from your income taxes (in the case of student loans, sometimes the principal amount can also be deducted – check with your tax professional for advice), and as long as you make on time payments, they only help your credit rating. If you feel that you are overwhelmed with debt, then by all means, put some extra money towards your mortgage. That way, once you have paid down some of the principal, you will have additional equity available for a cash-out refinance to roll your student loans into, if you can get a lower fixed mortgage interest rate.
if you save up money to start a new business, there is always the potential to make more money and therefore pay off any existing debt you may have. just be sure to keep at least 6 months worth of bill payments in your savings account, so that you have a cushion for the start up phase of your business.
best of luck to you!
the key will be passive income…..do one thing but get paid for it over and over….that could be a 2nd home that you rent out….a business that pays residuals every month, or writing a great ebook that pays you forever at 100% profit. Good luck!
If you have a passion and you know what you want than I say go for the business. Hell, you are only on this earth once. Go for it and good luck!!!
Good debt, bad debt. lol. All debt is bad. Pay off the student loan.
You never want to borrow against you home. (home equity loan) why put your house on the line? Also, home equity loans can be called due at anytime the bank wants.
Starting a business means you’re probably trying to increase your income? If I’m on track with this paying off your student loans can hurt you. While you’re paying on your student loans you get:
1. Annual tax deductions
2. Increasing your credit score with regular payments
3. Free up cash flow to run your business
Look at how much money you’ll be making running the business, how much of a return is that per year on your investment? Typically a consolidated student loan will be at a fixed rate in the 4.5% – 6.5% range. If you can make more than this by investing the money (starting a business) then paying off the loan will cause you to loose money.
Say your business returns 10% a year on the investment and student loans are fixed in at 6.5% then
10% – 6.5% = 3.5% more money on hand
Add to this the tax return you receive each year by having student loans and this number increases.
Good Luck!
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