The average person will spend two years and 10 months of their lives paying off student loans. It is a long, hard process fraught with stress and worry. Luckily, there are ways to pay off your loans faster with crypto.
The crypto market has grown leaps and bounds, with bitcoin recently reaching a value of $60,000. This is good news because with the adoption of crypto came the widespread use of blockchain, smart contracts, and most importantly DeFi which streamlines the process of paying off your student loans.
With that said, let’s take a look at how you can use crypto to pay off your student loans.
Ways You Can Use Crypto To Pay Off Student Loans
If you want to use your crypto to pay off student loans, you have two alternatives.
First, you can sell your crypto and use the revenue to repay your loans. However, selling your crypto may result in a significant tax liability. Furthermore, if the price of cryptocurrency continues to grow over time, you may miss out on big gains.
Another option is to take a decentralized finance (DeFi) loan based on your cryptocurrency holdings.
However, there are risks associated with DeFI loans that make it a risky option. For instance, the DeFi platform you take a loan from could literally disappear with your collateral, such as your crypto holdings.
With that said, you’re better off not using your crypto holdings to pay off your student loans due to the risk of liquidation. Instead, you should consider using more risk-free options like SoFi to refinance student loans.
What is Refinancing?
Student loan refinancing occurs when you obtain a new loan with a different interest rate or term.
It allows you to alter your monthly student loan payment structure in such a way that you’ll be paying significantly less than you normally would on a monthly basis – and by doing so, you’ll be able to free up cash to spend on other expenses.
US citizens and permanent residents who have finished a degree program at a Title IV approved university or graduate school can refinance their student loans if they choose.
However, it’s important to note that individuals who would like to refinance their student loans must be employed or earn a significant amount of money from other sources of income in order to qualify for a refinancing option.
Or alternatively, they must have a job offer with a start date within 90 days of completing their degree.
Are There Up-Front Fees Associated With Student Loan Financing?
While some credit institutions gave fees for student loan refinancing, others such as SoFi do not charge application fees, origination fees, or prepayment penalties for student loan refinancing.
When is the best time to refinance your loan?
The sooner you refinance your loan to a lower interest rate, the better because doing so will put you in a position to start paying less money per month towards your student loan repayment.
Given the trillions of dollars in student debt that millions of graduates in the United States are saddled with, it is hardly surprising that many are contemplating their repayment options and ways to refinance student loans.
You can use crypto to pay off your student loans, but you should be aware of the risks associated with this repayment method. Refinancing your student loans may be a better alternative to debt freedom.