I have about 45K in loans with a 2.785 interest rate. We would like to start saving to be able to buy a house in about 4-5 years. We have no other debt.
Would you try to get rid of your loans (right now I'm on a 30 year plan that would cost me about 20K in interest if I stay on it) or would you try to save money for a house so you can put 20% down and get a better mortgage rate?
2007-09-03 06:08:49 · 7 answers · asked by abod4 1 in Business & Finance ➔ Personal Finance
The interest rate on the loans is much lower than the rate you might earn on a CD for example. Student loans look good on a credit report and show your ability to pay down debt responsibly. I would save for the house.
2007-09-03 06:21:40 · answer #1 · answered by Luv2Answer 7 · 0⤊ 0⤋
First, I'd get a copy of my credit report (free at annualcreditreport.com) and verify that you have a good credit score.
Then, if your goal is to save up to buy a home in 4-5 years, then I would ask myself how big of a deal is the monthly payment for the student loans. If you can afford to get rid of the student loans, I would recommend to keep them because they're at such a good interest rate, and use that money to invest in safe investments (even CD's & online money market accounts are paying over 5.0%). Or if you have a little appetite for risk, I would invest part of that in an ETF or index fund which would increase your savings. The monthly payment on the student loan should not make a big difference (if that's the only debt) when you go to purchase a home. Good luck!
2007-09-03 06:28:27 · answer #2 · answered by RHJ10 2 · 0⤊ 0⤋
With an interest rate under 3% on your student loans, I'd leave those alone - keep you payments current obviously, but don't pay them ahead, you'll never find a rate like that! You can make more than that putting your savings into a CD and have them totally safe.
2007-09-03 07:00:42 · answer #3 · answered by Judy 7 · 0⤊ 0⤋
Definitely pay the loan off. As mentioned, your savings rate is lower than the rate you are paying on the loan. Eliminate the loan and put that monthly payment in the bank or better yet, apply it to the other loan and pay it off sooner. Paying off your debt will allow you to save more and get you into your new place faster.
2016-05-20 02:44:53 · answer #4 · answered by vida 3 · 0⤊ 0⤋
At 2.7% definately keep that debt as long as you can, that's cheap money. Stay out of other debt of course, save for a solid downpayment on the side plus some for new furniture etc so that buying the house doesn't get you into financial problems. Don't force yourself into a house, do it when it works well financially.
2007-09-03 06:43:51 · answer #5 · answered by The Scorpion 6 · 0⤊ 0⤋
I'd pay off loans first. This will help you secure a better mortgage later on.
2007-09-03 07:22:25 · answer #6 · answered by Anonymous · 0⤊ 0⤋
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2007-09-03 06:44:54 · answer #7 · answered by waseem khan 1 · 0⤊ 0⤋