I would get 4% dividend in the savings account and my interest on my student loan is 8.5% with about a 3800 balance. The Interest from the student loan is tax deductible!
2007-02-09 04:55:14 · 7 answers · asked by Mark R 1 in Business & Finance ➔ Personal Finance
You are better off paying off your student loan. You end up paying more in interest on the loan then you would earn in your savings account. Using the numbers you provided you could earn about $155 in interest if you put the money in your savings account, but you would end up paying $165 in interest on the loan.
2007-02-09 05:08:13 · answer #1 · answered by r4cats 1 · 0⤊ 0⤋
The interest on the loan may be tax deductible, but do you have enough deductions to take advantage of itemized deductions?
In one year you would make about $152 interest from the savings. The interest on the loan of $3800 for one year is about $323, a difference of $171. I don't think a deduction of $323 is going to result in a tax savings of $171. There are other factors to consider. You really need to consult a tax person or a personal banker to get a clear picture of all the possibilities
2007-02-09 05:09:45 · answer #2 · answered by billyshears 3 · 1⤊ 0⤋
Hello - I suggest you do the math. You know your tax bracket. My guess is that paying off the student loan is a better bet. A savings account is also probably not the best place to put your extra funds. Use your savings account to hold your liquid assets that you would need quickly - such as an emergency fund. This is usually 3 - 6 months of expenses. Find another, better investment tool when you have exceeded this amount.
2007-02-12 15:33:28 · answer #3 · answered by CJ 2 · 0⤊ 0⤋
Yes it seems even with a tax deduction on your interest, you will come out ahead if you pay off the loan instead of saving the money.
2007-02-09 05:06:15 · answer #4 · answered by Joseph's Mama 4 · 0⤊ 0⤋
Unfortunately, it will always cost you more to borrow money, than you will save in a savings account.
Only a 3800 balance? Pay it off ASAP and never worry about it again. :-)
2007-02-09 05:50:58 · answer #5 · answered by Coleen429 2 · 0⤊ 0⤋
pay off your loan, you will save more money in the long run
2007-02-09 05:03:36 · answer #6 · answered by Anonymous · 1⤊ 0⤋
pay off the debt now if you don't your going to only get a larger debt to pay off later and what ever you would get from the savings account wouldn't be nearly enough to cover it.
2007-02-09 06:43:00 · answer #7 · answered by aljbookworm 2 · 0⤊ 0⤋