I Have to Use my bonus to pay off my student loans?

I Have to Use my bonus to pay off my student loans?

I Have to Use my bonus to pay off my student loans?

Your first step is to understand the tax considerations. Start by applying the appropriate tax scenarios for your bonus to get a realistic sense of how much you are actually going to bring home rather than send to Uncle Sam. Business Insider This article gives a great overview to help you understand the tax considerations for a bonus.
Bonus of your company is a great way to start this year, especially if you have a neat pile to tackle student debt. Knowing how much bonus you to apply for your loan is without question one size fits all answer, but there are steps you can take to find the right solution for you.
If you do not have high-interest debt, a good next step is to review the progress you have made towards financial security. For example, having an emergency fund and, in some cases, retirement savings may be more important than being free student loan debt. Liquid (immediately accessible) funds amounting to six months worth of living expenses saving an emergency fund a solid base. If you do not have a supply of savings, you should consider placing your bonus there to make sure that you can handle the unexpected large expenses.
Another important financial goal is retired; while it may seem far away now, this is an important financial consideration for planning. If your employer offers matching contributions to retirement, you can get free money - back 100 percent on your investment - which is more valuable than prepaid loans. The same considerations should be done if your employer gives you the option to designate the entire bonus you against your 401 (k), which can generate large tax savings that outweigh the benefits of prepayment of the loan. to overview
Next, turn your attention to your debt - not just student loans, but also any credit card debt, car loans, etc. How much do you have, and how much interest you pay each loan? As a general rule of thumb is to pay off higher interest rate loans first. If you are a student loan at 6 percent, but you have credit card debt is big enough lead to an interest of 13 percent, then you must use your bonus to remove higher credit card debt than your loan.
public about the potential lifetime value of retirement savings, check out this introduction to compound interest.


Of course, because the "back" to pay down your student loan guaranteed, many might prefer to go that route. (If you think you have great credit and may qualify for a low interest rate, consider refinancing and consolidating your student loans.) For those worried about how to pay off student loans can affect their credit, check out this article on the Huffington Post the credit and loan payments - the benefits are likely to outweigh any cost. You can also benefit from a decrease in the overall amount of debt if you apply for new credit lines, such as mortgages, which take into account your debt to income.
Once you feel like you have addressed the above steps, it's time to review your student loan debt. You may be able to enjoy the greatest benefits of prepaid if your lender support reamortization (we do here in CommonBond), which allows you to apply for a lump sum payment of principal and then lower your monthly payments adjust accordingly. Although you can achieve amazing peace of mind to pay your loan, your position may be slightly different if you've locked a great interest rate, such as 3 percent or lower. Because the stock market offers returns of 4-7 per cent on average, you can earn more money over time by investing it than to pay a bonus of 3 percent of the initial loan.