Author Topic: Loan Payoff vs Saving  (Read 1400 times)

civil4life

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Loan Payoff vs Saving
« on: September 29, 2017, 06:55:59 PM »
Need some advice.  I currently have 3 loans accruing interest.

Loans      

Mortgage           $141,236.78    4.00%   
Student Loan   $12,854.99    2.82% Variable   
Citi CC           $13,164.31    1.99% until 8/18

I also have 2 accounts that have no interest but due in a year.

Solar                  $8,243.50          Balance Due 10/22/2018
B of A CC          $7,851.00           0% until 8/18
      
I do have the savings to payoff the Citi CC, B of A CC, and Solar loan, but would wipe it out.  I am in the process of suing my previous employer for discrimination.  I need to have easy access to cash for this. The money on the CC are from legal fees.

My original plan was to start throwing all my extra money on the student loan to payoff next.  That would take 12-18 months. 

Mentally I want to payoff debt, but I am wondering if I should be saving to  be sure I do not wipe out cash savings when these come due a year from now.

Any thoughts are appreciated. 

Thanks!


Playing with Fire UK

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Re: Loan Payoff vs Saving
« Reply #1 on: September 30, 2017, 12:56:10 AM »
Ack, tough question.

If you didn't need the money next year and could invest, then at those interest rates I'd be saying invest rather than pay down the debt.

Are you getting any interest on the cash savings? Is it possible to increase this?

How much do you save in a typical month, what could happen in the next year to reduce this? If you are confident you can pay off the balances due in 2018 with money you can save over the next year, then you might lean towards paying off another loan. Think about if you have the discipline to actually save the money.

How does your mortgage work? If you over pay, can you get the money back again (where I live then some, but not all mortgages work like this). If the funds are available, or you can get a HELOC, then I'd lean towards putting the cash savings into the mortgage where you get a guaranteed 4% return. You can then take it out to pay off the cards or if the student loan interest rate increases.

srad

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Re: Loan Payoff vs Saving
« Reply #2 on: September 30, 2017, 10:21:01 AM »
i see no need to pay those off.  Those rates are really good.  fyi, i just walked into my bank last week to make my final payment on my 5 year (used) car loan, it was 2.5%.  I had money from the get to to pay cash but choose to finance it.  With rates this low, keep the loans... invest your money in other things. 

And when you BoA card comes due, depending on what rate its going to in a year, that i'd either pay off or try to move it to another 0% card. 

yachi

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Re: Loan Payoff vs Saving
« Reply #3 on: October 01, 2017, 04:42:31 PM »
...or try to move it to another 0% card.

How do you find these?  All the offers I get have 3% transfer fees.

freemonk

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Re: Loan Payoff vs Saving
« Reply #4 on: October 06, 2017, 06:51:33 PM »
Why not fix the problem of over spending and start removing these debts?

civil4life

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Re: Loan Payoff vs Saving
« Reply #5 on: October 07, 2017, 02:09:09 PM »
The credit card purchases are purely legal fees.  No other expenses.  I have cash to cover these however I have purposely found these promotions to allow me to avoid the usage of cash that can earn interest.  The legal issue probably will last another year and I have a good case that if won will include legal fees and damages.