Help please (probably from my myself)

[Jamese20]

Hi guys,

I am kind of stuck in a predicament regarding my debts at present.. I purchased a bigger house than planned due to the longevity of not having to move ever which came at a short term price.

This left me with 23k at 7% and 7k at 12% on personal loans

Despite buying a new house and using loans etc.. My costs are 49% of my income

I know that I can save 5k over the next 5 years paying them off early over the next 12 months but I also know that would mean I have a very nice large amount of cash I could invest and start learning about investing in passive funds and feeling that out.

What advice would you give as I really am finding it hard to decide what is best for me in terms of learning at a cost of 5k over 5 years or getting to a higher saving rate quicker in 12 months time (65-70%).

Any help would be greatly appreciated

[rockeTree]

At 7% and 12% pay the loans pay the loans pay the loans.


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[marty998]

A famous (deceased) Australian media mogul / billionaire once remarked that you should "bite off more than you can chew, and chew like hell".

I'd pay the loans. Briskly.

[Jon Bon]

As the other said, pay off those loans!

However, you can start a vanguard account for $1000. So if you want to go through the motions and at least have yourself set up for when you do have spare cash to invest, you will already have it ready.

But surely its easy to see that an 8% return in the market (before taxes) is actually less than the return of paying down your 12% loan. (or the 8.2% average interest rate you are paying)

Now go, and come back in six months and tell us all how you killed that 12% loan!

[Dee18]

Can you take in roommates for a while?

[Capt j-rod]

I have to assume that with those rates you are located outside the USA. If not then you could try a refinance to a lower rate. The obvious has been stated... Pay the loans. Highest rates first. Possibly consider a smaller house. MMM has proven that a house is a lousy investment (private home). Rates in the US are 5% and lower. I have a charge card with a better rate than 23%. Please elaborate more about your location and situation to help us better understand.

[Jamese20]

Thanks for the responses guys

I'm from UK so I guess slightly different but not that much

I think I can get rid of the higher interest one fairly quickly but just working out whether they are going to stitch me up with interest overpayment penaltys each time I over pay

Seems like a pretty strong argument for getting rid ASAP?

[KungfuRabbit]

Is it safe to assume these personal loans are to avoid PMI ? 

No one here will tell you not to pay off a 12% loan.

Aside from doing enough 401k to get employer match, also pay off that 7% loan.

Need a full case study though. If you bought a big house because you eventually want kids but don't have them now - get roommates. Within 6 months you could then pay off the loans and have a few thousand in the bank...

[Jamese20]

Avoid pmi?

They were to get essentials for the house so we could live in it and we got caught out with our little boy waiting for our original new build to be built

Basically he changed everything lol

[terran]

Avoid pmi?

PMI = Private Mortgage Insurance. It's an extra fee that you generally pay on US mortgages if you put less than 20% down. Don't know if it's common in other countries.

[Jamese20]

ahh i see!

well it looks as if i have been slapped in the face and for good reason -  i will now sit down and work out how to quickly get rid of these debts!

i think its going to take me 12 months which will hurt but once its done its done and then i can start my path to FIRE really aggressively