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Debt Repayment vs Investment

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Now that I'm wrapping up law school and going to articling, obviously I'm starting to think about my long-term plan for repaying my government and private debt that financed my degree. From working prior to school and saving some money, I'm in the very lucky position of being able to potentially pay off about a third of my debt basically immediately if I want to while still maintaining a small emergency fund.

 

Any thoughts on if it is better to take and invest that money and extend out my loan repayment or just throw it all against my debt to pay it down as fast as possible?

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Posted (edited)

This is a question of spread. If you can find investments that offer risk adjusted returns in excess of your interest payments, then it makes sense to stretch the debt out as long as possible. If you can make 7% on your money (in expectation) and your interest is 4% then you make a 3% spread and you want to keep that going as along as is possible. Naturally, you have other considerations such as volatility and ability to service the debt during periods of under earning, etc.

However, if you cannot find such investments or are unable to do so for common emotional factors (e.g. have debt aversion, cannot rationally allocate capital due to emotional attachment) then repaying debt is the best course of action. Generally, it is not hard to find risk-adjusted investments above interest costs on student loans (though this is not always the case). However, people tend to be quite poor allocators of capital due to emotional responses to money and thus the best course of action for them is to repay debt.

Only really you can answer what is best for yourself.

Edited by AllanRC
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22 hours ago, Luckycharm said:

Getting  rid of that debt is top priority.

I don't know how you could see @AllanRC's comment and think this solitary, unhelpful statement was worth posting

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23 hours ago, Luckycharm said:

Getting  rid of that debt is top priority.

Bad finance advice is bad finance advice.

@OP: Considering that the BoC has signalled that they aren't going to increase rates for (at least) this year, your LOC is literally free money (assuming it's at prime). Getting more than prime in a broad-based index over a time frame of 1-2 years should pose few problems.

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Buy something really safe and blue chip with no risk of capital loss, like Nortel or Blackberry

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7 hours ago, Eeee said:

Buy something really safe and blue chip with no risk of capital loss, like Nortel or Blackberry

I hear that GME has replaced gold as the new store of value.

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7 hours ago, Eeee said:

Buy something really safe and blue chip with no risk of capital loss, like Nortel or Blackberry

Bre-X was really promising back then

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