I have a student loan that has a repayment balance of about $1100. (No, that is NOT my only student loan-i wish :) Right now, I have enough money saved up that I can just pay that loan off altogether, however, it will put a dent in my savings and I haven't touched my savings at all. I would just love to have one less bill to worry about per month. I don't make a lot of money (so much for college) so saving a grand would take some time. So should I pay off and hurt my savings, but leave me with one less bill OR should I just continue making my monthly $50 payments?
2006-09-24 09:23:30 · 18 answers · asked by tru_happiness 2 in Business & Finance ➔ Personal Finance
The interest you're being charged on the loan probably outweighs the interest you're receiving on your savings. Having one less debt AND showing that you've paid off a loan, not to mention a student loan, is a really good thing for your credit file.
2006-09-24 09:27:05 · answer #1 · answered by misslabeled 7 · 0⤊ 0⤋
Depends on the loan. If the loan is what is known as revolving credit then pay it off as the interest is recomputed every month and you will save several hundred $$ over the life of the loan paying it at $50/month. If it is a conventional loan then the latter payments go primarily to the principle so you won't really save anything at the end of the loan, maybe a couple of bucks a month out of your $50. Call the lender and check it out , they can give you the info.
2006-09-30 14:59:09 · answer #2 · answered by Norman 7 · 0⤊ 0⤋
its a numbers game
If you deposited 1100 in a savings account (I'm guessing you do from what you said above) will it make as much in interest as you are paying on the loan?
Consider that one is compounded every quarter. The other is compounded daily. So you need not bother looking at the % of interest. Rather the actual dollars your paying on the interst portion of the loan. Look at your statement. there should be a part that tells how much money of your payment is going to interest. By bet is that you paid more in interest on just your last payment than all your savings for a full year. Your money ahead to get out from under the burdon.
I rest my case
2006-09-24 16:28:50 · answer #3 · answered by john d 3 · 0⤊ 0⤋
If you are most concerned about getting rid of a bill, why not consolidate your student loans into one payment and then pay off higher interest debt first? Although student loan debt is a pain, it can help you on your taxes. You can deduct the interest you paid each year. So I would suggest if you have other debts, like credit cards or car payments, paying off those first and then if you can, pay more than the monthly minimum on your student loans to shorten the repayment period.
2006-09-27 15:32:21 · answer #4 · answered by josie 2 · 0⤊ 0⤋
Depends on what you are doing with the savings. Usually student loans are low interest and tax deductible. If this is the case and you use the savings to invest and not buy junk you may be better off in the long run to wait and pay off the loan later. This is only if you invest wisely.
Remember money makes money and a healthy debt to equity ratio is not only good for business it good in life as well.
2006-09-24 18:06:26 · answer #5 · answered by r g 3 · 0⤊ 0⤋
savings is important in case some emergency happens and you can't work, so i would say pay $600 towards the loan and keep $500 in savings, keep paying $50 per month (or more if you can) an in 10 months the loan will be paid off and then take that $50 and put it towards the other student loan with the lowest balance and keep repeating till it is all done.
2006-09-24 16:28:42 · answer #6 · answered by ken 3 · 0⤊ 0⤋
It depends on if you have other bills, like credit cards, their balances and what rate of interest you are paying. I would pay off something with a higher interest rate before the student loan as that is a low interst loan. Pay off credit cards first. They typically have super high interest rates. If you don't have any other loans, or payments to make, then certainly pay off the student loan early. Just make sure there are no penalties with the bank holding the loan for paying off early.
2006-09-24 16:33:43 · answer #7 · answered by becka06096 2 · 0⤊ 0⤋
There are a lot of variables here. I highly recommend you contact Clark Howard on his radio talk show. He broadcasts daily out of Atlanta but can be heard nationwide. He advises people in financial situations. I know part of it depends on how much your loan rate is and how much you're presently earning on the money. A lot also depends on your lifestyle, how long you'll be in school and so many other things. Any answers you get here won't be able to take everything into account. You can find information on Clark Howard at...
http://clarkhoward.com/
All that said... Much of it depends on how well you'll sleep at night! Good luck to you.
2006-09-24 16:29:48 · answer #8 · answered by janisko 5 · 0⤊ 0⤋
As a mortgage lender and author on credit, I find that people with unpaid student loans generally have lower scores. I think you should pay them.
you might like www.LearnAboutCredit.com
2006-09-29 18:13:19 · answer #9 · answered by supercreditguru 3 · 0⤊ 0⤋
Pay off half. You need to keep some money in the bank to fall back on.
2006-09-24 16:32:35 · answer #10 · answered by MAK 6 · 0⤊ 0⤋