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tryingtodothebest

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Lump sum student loan repayment?
I have the ability to repay my student loans ($40,000) in a lump sum payment. I am wondering if it is smart to do this? I do not have any credit card or other debt. How would paying them off this way impact my credit score?

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Repayment of debt

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Paying off debt is usually a good thing.  It's always a GREAT thing when it is revolving (Credit card).  However, installment loans have a far lower impact on your scores when paid off.  Here's a piece that Equifax had to say on it:  (http://blog.equifax.com/credit/does-paying-off-an-installment-loan-early-affect-my-credit-score/)  

More than a credit impact would be a financial impact.  By that I mean this:

#1.  Being debt free is a great pyschological boost.  However, having money (Emergency fund) in the bank is also a huge boost.  It would be wise to speak with a financial consultant about your long term goals to see what best accomplishes them.

#2.  Interest rates.  Student loans can be VERY low on the interest rates side and consequently, your money may accomplish more being put to work in other arenas.  Again, I'd recommend speaking with a financial counseler in this area.

Conclusion:  Paying off installment loans has little impact.  The bigger conversation for you will be how will the money best serve you to reach your goals.  Hope that helps.

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