Pay off debt?

[Anonymous]

Just bought a house, so savings are pretty much depleted (closing on old home, so should have around 40k in cash soon).

What debt should I pay off? DH and I each have a car loan of about $9k, at about a 4% interest rate. There are 4 years left on each loan.

55k in student loans at 3.5% ($300 per month)

credit card balance of around 10k (buying house stuff).

Obviously, the credit card balance needs to be paid off. Thoughts on whether we pay off the others?

[Anonymous]

the interest rate is pretty cheap on those other items. If you can get a better return by investing the moeny invest it and contiue with your usual payments on those other items.

[Anonymous]

Look at your monthly expenses. If one of you were to lose your job, and you cut back to just necessities, how much would you need to cover one month? Multiply by 6 so you have a 6-month emergency fund. With any remaining, first pay off the CC, then car payments and student loans last.

[Anonymous]

I would pay off each car as best you can depending on your income, that will be two fewer "installment loans" off the credit report, and you will have tangible monthly "saving" by not having to pay the car loans every single month. You can then sock that saving into the credit cards or the student loans.

[Anonymous]

I would pay off credit cards and the car. I always pay cars in cash so I don't like having a loan out on that.

Student loans can wait.

Build up expenses in case you're laid off. Like pp said, 3-6 months is perfect depending on how stable your jobs are.

[Anonymous]

I would take the $40K and immediately pay off the credit cards and both car loans. Then put the remainder in a separate account and set up auto transfers of the money that was going to the car loans, and whatever other money you can take out depending on your budget, to set up your emergency fund. Leave student loans alone until emergency fund is built up as PP described. Then start paying extra on student loans.

[Anonymous]

Anonymous wrote:I would take the $40K and immediately pay off the credit cards and both car loans. Then put the remainder in a separate account and set up auto transfers of the money that was going to the car loans, and whatever other money you can take out depending on your budget, to set up your emergency fund. Leave student loans alone until emergency fund is built up as PP described. Then start paying extra on student loans.

This is what I would do as well.

[Anonymous]

I would pay off the credit card debt and invest the remainder of the money.

[Anonymous]

I would pay off the credit card debt immediately and then would pay off the car loans. I have never had a car loan and neither DH or I can stand the idea.

We do have student loans which I would love to pay off tomorrow, and we could do it, but it would deplete our savings by a lot. So we have sort of a middle way approach of paying a bit more than the monthly minimum and/or paying ahead when we can, while also saving a bit each month towards a nonspecific nest egg (aside from retirement and college funds).

[Anonymous]

Don't know why you can't stand car loans. They're often incredibly cheap.

[Anonymous]

I am not that PP, but paying any interest, even cheap interest, on a depreciating asset turns a lot of people off.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I would take the $40K and immediately pay off the credit cards and both car loans. Then put the remainder in a separate account and set up auto transfers of the money that was going to the car loans, and whatever other money you can take out depending on your budget, to set up your emergency fund. Leave student loans alone until emergency fund is built up as PP described. Then start paying extra on student loans.

This is what I would do as well.

+1

[Anonymous]

Anonymous wrote:I am not that PP, but paying any interest, even cheap interest, on a depreciating asset turns a lot of people off.

+1

[Anonymous]

Anonymous wrote:

Anonymous wrote:I am not that PP, but paying any interest, even cheap interest, on a depreciating asset turns a lot of people off.

+1

Yes, I'm that PP and it's for that reason. We would love to have zero debt but are okay with mortgage (since it would be so hard to save up the amount needed for a house in this area and didn't want to rent forever) and student loan debt (because it resulted in huge pay increases for both of us). But if I'm going to borrow money for a car, why not just lease one?

[Anonymous]

Anonymous wrote:

Anonymous wrote:I am not that PP, but paying any interest, even cheap interest, on a depreciating asset turns a lot of people off.

+1

Obviously they're free to feel however they want, but that makes no economic sense. If only there were some way to take possession of a car for, say, the first 36 months, without purchasing any equity stake in it. . .