Student loans are a significant cause of stress for young professionals with an average paycheque. They pay hefty instalments each month and struggle to meet other ends. Some of them are even trapped in a debt cycle where one loan is taken to repay the other.
You are among thousands of working professionals for whom managing the instalments is getting out of hand. Sometimes, it becomes mandatory to go for another option, like unsecured loans with bad credit. These will only add more to your debts.
Specific measures can help stabilise the situation without any extreme change in the lifestyle. Here, we have mentioned some ways to repay student loans to support the repayment.
Ways to Repay Student Loans with keeping budget intact
- Refinance the Loan
Several lenders offer student loan refinancing as a solution in the UK. Based on your payment history, you may receive a better offer with lower interest rates. However, the terms of your current loan will determine the total cost of the loan.
Some lenders charge a substantial fee for foreclosure, making refinancing expensive. You should also first ask the present lender for a deal on refinancing, as they might offer you a new loan with flexible terms and interest rates.
One major drawback of refinancing is the processing time. Finding reasonable terms from a lender may take a couple of weeks. Add the time your present lender will take to process the request for foreclosure.
- Extend the Term of Current Loan
Extending the term of the current loan will significantly reduce the instalments. You will find the repayments more manageable than before without going through the trouble of refinancing. You must take a good look at the different aspects of extending the terms before accessing the lender.
The total cost of the loan will rise when the tenure is extended. You are paying the interest for an extended period now. Also, the lender may charge you some fee for term extension as agreed on the loan terms.
Every lender does not offer a term extension to its borrowers. You must check the loan documents carefully for the extension policies and charges. It becomes more important when you have applied for low credit score loans in the UK. If applicable, you will enjoy lower instalments each month to make the finances more stable.
- Use Repayment Holiday
Many lenders also offer repayment holidays to their borrowers during an emergency or financial crisis. A few month’s break from repayment allows the borrowers to manage their finances after a setback. It will extend the loan term based on months taken off.
It is a temporary relief provided by lenders to their borrowers. The instalments, interest rates, and overall cost of the loan will be similar. You must use the holidays during severe financial troubles as they are limited in number.
- Remortgage the House
You can use the equity over the house to get a remortgage at more favourable terms. The lower instalments will allocate space in the budget for student loan repayment. The process is somewhat similar to the student loan refinancing.
Unlike unsecured loans with bad credit, the current lender may offer you a loan over the present equity of your house. The mortgage interest and instalments will not be the same. Only the duration will increase based on the loan amount.
You might want to use the amount to foreclose the student loan. However, it comes with a severe risk of losing the home to the lender if the payments are not made on time. You must think of it as an option only if you have a concrete repayment plan.
- Use Tax Benefits
The government offers tax benefits to working professionals paying off their student loans. The interest paid is deducted from your total taxable income for the year. Consult a financial expert to learn the hidden benefits of tax and save substantial money each year.
- Employee Benefits
Some employers offer benefit schemes to employees with a student loan. It is similar to the pension or the emergency fund provided by the vast majority of companies. Ask HR about the benefits before signing the job offer to get some additional support.
As a business owner, introducing student loan benefits will perk up your employee retention rate. The number of employees paying off the loan in your organisation may very well amaze you. Some great talents in the industry are willing to work with an organisation that helps them repay instead of health benefits.
- Invest in a Side Gig
Based on your area of expertise, you can start a side hustle to raise some extra money. Technology has made it possible to start a business within a few hours at home. You should have internet connectivity, a mobile phone, and a laptop to start a business.
Numerous online marketplaces provide space for your products to sell them to buyers worldwide. You should spend a couple of hours outside the regular job to manage the online store efficiently. They focus on every element of the sales, from directing customers to delivering the product.
Designers and writers can use their skills to get some work as freelancers. At some point in time, you may make more money than your regular job from freelancing. You can switch to freelancing full-time as it has many perks that include freedom of hours.
- Declutter the House
Many people have raised thousands of pounds after getting rid of the sentimental clutter from their house. You have been preserving the same stuff for years now. If you have no strategies to utilise it ever, you make some money from it.
Again, online marketplaces sell millions of used items to collectors. There are dedicated sites for a particular category of products to get your item’s best value. The money can help you repay the loan or at least the instalments for some time.
To Conclude
To sum up, these are some of the many ways to make student loan repayment easier than extreme budgeting. You should have a backup plan for the start to counter the tough times. However, you may find some solutions without a backup plan in the future that might seem a little expensive.
