Currently have 4 outstanding debts:
Student Loan: $6,549.39 3.5% – making monthly payments of $827.25
Student Loan: $3,721.63 3.0% – making monthly payments of $537.00
Student Loan: $2,749.59 4.875% – making monthly payments of $399.23
Car Note: $5,136.86 1.9% – making monthly payments of $647.85
Current savings: $39,000…~$55,000 in 401k
No other credit card debts or obligations
At this rate, I should have all of my loans paid off by November of 2013. Obviously, I am living in the red for the time being until these debts are paid off, and using my savings as my reserves for making these payments.
My current job is secure and do not intend to lose it or move to another company.
My question is whether or not I should use my current savings to pay off the remaining $18,157.47 of my loans today, or if I should continue on this brutal path that I have been on for almost a year, continually exceeding monthly budget and having no opportunity to save? Is it better to get rid of debt right now, if I have the ability, or if I should continue hoarding my cash in case of unforseen circumstances?
I really hate to see people drain there assets and leave themselves exposed like that. It always seems it is at those times you need the emergency savings.
While the interest rate would probably be more than you are currently paying on the student loans and if your credit score is better than 700 there might be another way.
What if you instead looked at consolidating those remaining balances in an unsecured debt consolidation loan from Lending Club? It seems the additional interest you would pay would be a cost of prudently protecting your savings account.
Additionally, if you decide to go the Lending Club route, let me know what your loan number is and I’ll help fund it.
With the unsecured debt consolidation loan approach you could significantly reduce your monthly payment, get the loans paid off now, stop draining your savings account and prepay the consolidation loan to reduce your interest rate.
That certainly seems like a reasonable approach to me.
Please post your responses and follow-up messages to me on this in the comments section below.Should I Drain My Savings to Payoff My Student Loans? - Sean by Steve Rhode