My fiance just hit me with a big one. He has $20, 000 in student loans that he never told me about. I don't want to start our marriage in debt so I want to get this paid off as soon as possible. I have no clue what to do, but I know being this far in debt is not good. We own a home, and there is 60k equity in the home should we sell and move into something smaller? Refinance?
2007-05-29 06:26:26 · 7 answers · asked by S 2 in Business & Finance ➔ Credit
Everyone I know has student loans. Just make the monthly payments on time and it won't be an issue. Make sure he has consolidated all the loans as much as possible.
2007-05-29 06:29:30 · answer #1 · answered by Anonymous · 1⤊ 0⤋
The big question I see is which would cost you less. That's probably a function of the interest rate and the tax impact.
Before you refinance, try this: do 2 pretend tax returns as if you were married for the both of you for 2006. One would be with the student loans in place, and you're paying on them. The other would be if you refinanced the house or got a home equity loan against it, but used that to pay the loans off. Then see what it would cost you to pay off each form of debt, and go from there.
If you used tax software, this would be fairly simple to do. Just be sure that you save the pretend returns under a different name, so that you don't corrupt the return you filed already. At the very least, print a copy of the return before you go any further.
2007-05-29 06:38:05 · answer #2 · answered by Ralfcoder 7 · 0⤊ 0⤋
NO NO NO - do NOT Refinance. Don't do it!
Here's why. A mortgage debt is created specifically so that the banks make the most return on their investment in the first 5 years. You own your home - so look at your mortgage statement. If it's a 110K home - at 6.5% interest - the first few years, between 89 & 91% of the montly payment is going towards INTEREST (not the principal debt).
If you've been paying on your home for 5 years, the amount towards your principal will be higher. If you refinance - you go back to paying the bank 91% interest! Don't do it.
Student loans are usually (usually!) low interest debts. And if you paid it at it's absolute lowest amount - you'd still only pay double the amount you borrowed.
I agree starting off a marriage in debt isn't the 'ideal' way to do it - but maybe sitting down, listing ALL your debts - lowest to highest (include your student loan and your mortgage) and figure out how much (monthly) you are paying towards debts. Make sure you reduce all your payments to the minimum amount per month. Another words - if your credit card minimum is $50/mo, and your trying to knock it down faster by paying $100 - stop. Only pay the minimum (follow along and trust me for a minute). Focus on your smallest debt first - regardless of what it is. Get rid of it. Now the extra amount that you were paying on your credit card ($50) plus the amount you were paying on your smallest debt (say $10) goes to the 2nd debt. Pay the minimum on it, plus the $60 you were spending on the other 2. Pay it off. Roll that amount (total) over to the 3rd debt. Do this until you have paid off everything - INCLUDING your mortgage. Then take the amount you were paying on your debt, and invest it. The term used by different financial planners is 'Debt Snowball' - Dave Ramsey talks about it in Financial Peace. Great book btw.
My husband and I are doing this (we attended a seminar that I just summarized for you!) and we will be 100% debt free in 8 years. But we have 2 brand new cars, and a new mortgage, and a bunch of pre-marriage debts. 8 years - INCLUDING our mortgage. It'll save us about 200K in interest payments.
Good luck!
2007-05-29 07:04:03 · answer #3 · answered by Dee 3 · 0⤊ 0⤋
Well yes being in debt is not good, BUT many millions of people are in debt and getting along just fine. And especially when it is something like student debt. In reality the min payment on 20k of student debt is only about 300-400 a month at most. So as long as you can afford that just except it as one more bill. Then down the road you may have enough equity or assets to pay for it. Its much important to put your disposable income in a home savings for emergencies or important expenses at this point.
Combined, me and my fiance are about 30k in debt. However we still get are having no problems and have excellent credit scores. Just have him keep chipping away at it.
2007-05-29 06:30:21 · answer #4 · answered by Anonymous · 1⤊ 0⤋
I'm currently a student and when I graduate I'll probably have that much in student loans or more.. But the thing is I'll have a decent paying job right out of college to start paying them off, shouldnt he be able to do the same?
2007-05-29 06:30:29 · answer #5 · answered by BravesWings 4 · 1⤊ 0⤋
Student loans is quite a common thing, I wouldn't fret about it too much. If it was 20k in credit card debt, then it'd be a whole different ball game.
2007-05-29 06:31:30 · answer #6 · answered by Sunidaze 7 · 0⤊ 0⤋
Look to pay it off ASAP. What % rate is it at? Look to transfer it to something lower, even using balance transfer options at 0%. You could take a HELOC loan against your home and if that is lower, use that to pay down the loans.
2007-05-29 06:33:45 · answer #7 · answered by Anonymous · 0⤊ 0⤋
You have already joined your finances with his if you bought a home together... So you've already started out with the debt.
2007-05-29 06:30:24 · answer #8 · answered by Anonymous · 1⤊ 0⤋