Author Topic: Invest or pay down loan?  (Read 2544 times)

Azide

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Invest or pay down loan?
« on: March 04, 2012, 12:42:54 AM »
Hello everyone,

Really liking this forum and whole website, I was just hoping to get some advice about what to do with some money I'll be getting over the summer. I'm a first year medical student in Canada, so I have a lot of student debt, most of which is through the government so it doesn't accumulate interest. However I'll have about $12,000 debt through the bank by the end of the school year. The interest is at prime, which is around 3%. I have secured a research job for the summer and I think I'll be making about $5,000 for 10 weeks of work. I don't know much about investing, aside from some basics learned from reading the articles on here, but I have some friends who have been quite successful at investing so I was just thinking if it would be worth it at this point in my life. Does anyone have input on what to do with the money, I know it is not a lot, but if I put it in something that was long term, it would probably give me a return greater than 3%, right? Or should I just put it all towards my bank loan and not even think about investing until I have paid off all my debt? Most doctors in Canada (US is a different story with their insane tuition) can pay off their debt quickly once they start work, so that's why I was thinking to start investing now and start building a portfolio, as opposed to my first investment being at age 30.

RWD

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Re: Invest or pay down loan?
« Reply #1 on: November 27, 2018, 02:00:16 PM »

RWD

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Re: Invest or pay down loan?
« Reply #2 on: November 27, 2018, 02:14:37 PM »
Invest.

Oops, by habit I linked to the USA section of that thread. But if you scroll down there are posts about Canada too. Same principals apply in this case though. You should be investing instead of paying down low interest debt.
« Last Edit: November 27, 2018, 02:16:14 PM by RWD »

thefrugalfuyanger

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Re: Invest or pay down loan?
« Reply #3 on: November 29, 2018, 06:22:34 PM »
Invest.

Oops, by habit I linked to the USA section of that thread. But if you scroll down there are posts about Canada too. Same principals apply in this case though. You should be investing instead of paying down low interest debt.

To jump in here... if I'm still paying down high-interest debt, should I research investing?  I plan to actually start once my remaining debt (student loan and car) is under 7% interest, which will be in 12-18 months depending on how many side gigs I can drum up.

RWD

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Re: Invest or pay down loan?
« Reply #4 on: November 29, 2018, 09:53:40 PM »
Invest.

Oops, by habit I linked to the USA section of that thread. But if you scroll down there are posts about Canada too. Same principals apply in this case though. You should be investing instead of paying down low interest debt.

To jump in here... if I'm still paying down high-interest debt, should I research investing?  I plan to actually start once my remaining debt (student loan and car) is under 7% interest, which will be in 12-18 months depending on how many side gigs I can drum up.

Well sure. It doesn't hurt to know what the next step in your plan is.

Redmamba23

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Re: Invest or pay down loan?
« Reply #5 on: March 04, 2019, 11:18:42 AM »
I am 30 yrs old.  I have an IRA, a mortgage, and student debt.  My employer wont contribut to a 401k for another 8 months.

The mortgage interest is about 4.125%.  the Student debt is 15k at 5ish% and 15k at 6%. 

It looks like from everything I've read above, I should be continuing to invest.  However, I really want to purchase a rental property and in order to do that, I have a feeling I need to pay down student debt first.  What are people's thoughts?  Should I continue to throw money at my retirement (I have 1.5x my salary) or pay down my student debt first?

Thanks to all who contribute!

FrugalToque

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Re: Invest or pay down loan?
« Reply #6 on: March 04, 2019, 11:34:50 AM »
Hello everyone,

Really liking this forum and whole website, I was just hoping to get some advice about what to do with some money I'll be getting over the summer. I'm a first year medical student in Canada, so I have a lot of student debt, most of which is through the government so it doesn't accumulate interest. However I'll have about $12,000 debt through the bank by the end of the school year. The interest is at prime, which is around 3%. I have secured a research job for the summer and I think I'll be making about $5,000 for 10 weeks of work. I don't know much about investing, aside from some basics learned from reading the articles on here, but I have some friends who have been quite successful at investing so I was just thinking if it would be worth it at this point in my life. Does anyone have input on what to do with the money, I know it is not a lot, but if I put it in something that was long term, it would probably give me a return greater than 3%, right? Or should I just put it all towards my bank loan and not even think about investing until I have paid off all my debt? Most doctors in Canada (US is a different story with their insane tuition) can pay off their debt quickly once they start work, so that's why I was thinking to start investing now and start building a portfolio, as opposed to my first investment being at age 30.

With your income and low interest debt, you should invest in a TFSA.
Your after-tax income goes into that, and it grows (and can be withdrawn) without incurring any further taxes.
(For now, avoid RRSPs.  That's a way to delay taxation until retirement, but you don't need to do that now, since you're in such a low tax bracket.  Save your RRSP space for when you're doctoring and making real cash.)

Toque.

FrugalToque

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Re: Invest or pay down loan?
« Reply #7 on: March 04, 2019, 11:36:09 AM »
Invest.

Oops, by habit I linked to the USA section of that thread. But if you scroll down there are posts about Canada too. Same principals apply in this case though. You should be investing instead of paying down low interest debt.

To jump in here... if I'm still paying down high-interest debt, should I research investing?  I plan to actually start once my remaining debt (student loan and car) is under 7% interest, which will be in 12-18 months depending on how many side gigs I can drum up.

There isn't much to research though, since you just need to find a cheap way to access index funds.  But yes, by all means, pay off all of your debts at 7% or more as soon as possible.

Toque.