Need help on recent dumbness

[MrMasked]

Ok need some help, I have two trains of thought and I am going in circles on which to choose. I was debt free until a couple of months ago when stupid me took out a loan (30000 @ 10% 8 years) for home improvement. With the payments I now have a cash flow issue where I break even every month or slightly slip into negative withdrawing from savings. Should I just pay off the loans over time, take 30k out of my 50k savings and pay them off now, or stop paying toward my 401k (healthy amt at 42, contributions are 19500 annual) and use that money to pay off debt before starting the 401k back up?

[dandarc]

Assuming no pre-payment penalties or any other strange terms, that 10% is pretty high - puts you at item #2 in the investment order. https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153

So you would not dip into emergency fund (item #0) for this - have you really thought about how much is enough for your emergency fund?

And you also would not forego any 401k match (item #1) - does your employer offer that?

But after those two things, then paying off 10% debt should be your priority. Current 10 year treasury yield is about 3.5%, so this loan is well over that + 5% recommended in the sticky.

[nereo]

When I’m doing, refer back to the investment order

In this case, you contribute only enough to your 401(k) to get a company match, and then use all other income to pay off the 10% debt.

Whether you should sell investments to pay off the loan requires more information about tax burden. But in general in your case you should be able to pay off $30k in debt in roughly 18 months, so I’d lean against selling from taxable accounts unless the additional taxes are low.

https://forum.mrmoneymustache.com/investor-alley/investment-order/