As interest rates continue to increase, many borrowers are starting to wonder if now is the right time to start repaying their debt. With many student loans still in forbearance, as well as increasing wages with the current job environment, many are posting higher take-home pay and savings rates than before. That begs the question, is now the right time to tackle your loans?
While increasing interest rates generally mean your fixed-rate debt is cheaper, that isn’t all at play here. Record breaking interest rates have deflated the real value of your total outstanding debt, making it even more manageable than ever to start tackling. That said, reality is always complicated, and some types of debt might be more beneficial to pay off than others. While this isn’t a guide on methods to pay off your debt, which we’ve already covered here, there are some guidelines to follow:
- Account for differing interest rates
- Remember to keep an emergency fund
- Try to reduce costs that increase your debt
- Pay above the minimum
You don’t want to rush into paying off small, subsidized debt like your Student Loans when you might find more value elsewhere. But, as Americans continue to report increased credit usage, now could be the time to start tackling some of your higher APR balances that might be causing you stress. Mathematically speaking, with interest rates rising and inflation still at record highs, paying off your debt now is a lot cheaper than it was a year ago.
