Debt

Pennypacker · 02-25-08, 06:35

Are some of you guys still carrying your school loan debt around with you? I'm trying to pay mine off. I owe about $30,000 and I graduated in 2000. Just seems like a lot to still have.

What about car loan debt? I think I can pay that off soon, but I might sell the thing anyway, drive my mom's Corolla around instead (she moved to Scotland), and use the proceeds to pay off my school loan. It would be refreshing to not have debt of any kind--even the type deemed by most as "acceptable."

I do have credit card debt right now, but it's only $266. Guess what that was for? Yup, the Flex.

Anyways, anybody have an opinion, thoughts, advice?
Thanks

Macruz19 · 02-25-08, 07:05

When you have a variety of debt.. always p/o the lowest balance first, and then use that monthly payment amount that you paid off against for the next loan.

Example...

P/O
1. CC $266
2. Car loan
3. School loan
4. Mortgage.

hockeyplaya13 · 02-25-08, 07:13

Yea, the more debts you have, the more interest you are paying. So like Macruz said, take out the lowest ones first. Then you don't have to worry about those and you are no longer paying interest on them.

Holden_C04 · 02-25-08, 07:52

Quote:

Originally Posted by Macruz19

When you have a variety of debt.. always p/o the lowest balance first, and then use that monthly payment amount that you paid off against for the next loan.

Example...

P/O
1. CC $266
2. Car loan
3. School loan
4. Mortgage.

Logically, it makes sense to pay off the highest interest debt first but it isn't always the best choice. Money is a very emotional thing and if one is deep in debt, they tend not to regard this matter in a very logical manner.

In this case, it would be best to pay off the smallest debt first and build up a snowball, whereby the debt payment per item continually increases until all debt is erased.

Nonetheless, in this very specific case both theories have the same outcome.

mshu7 · 02-25-08, 08:34

+2 to what Holden_C04 said. Have you listened to Dave Ramsey before Holden?

Holden_C04 · 02-25-08, 08:38

Quote:

Originally Posted by mshu7

+2 to what Holden_C04 said. Have you listened to Dave Ramsey before Holden?

I picked up that little gem from a great blog I read called, The Simple Dollar. Its a fantastic read.

mshu7 · 02-25-08, 08:41

Gotcha! If you're into financial stuff like that, you might check out DaveRamsey.com. Basically, his philosophy is to not borrow money (duh!). He has a step-by-step process to get out of debt and live in "financial peace". My wife and I are almost half-way through his 13-week Financial Peace University. It's completely changed the way we think about money.

Holden_C04 · 02-25-08, 08:48

Quote:

Originally Posted by mshu7

Gotcha! If you're into financial stuff like that, you might check out DaveRamsey.com. Basically, his philosophy is to not borrow money (duh!). He has a step-by-step process to get out of debt and live in "financial peace". My wife and I are almost half-way through his 13-week Financial Peace University. It's completely changed the way we think about money.

Yeah, I've begun to handle money a little bit differently. I noticed in one post a remark you made about not wearing the latest fashion because it wasn't necessary to live - I knew right away you were reading the same sort of stuff I was.

Mind you, I like nice threads. It makes me feel better but I never pay full price. My last Perry Ellis shirt was $20.

Accumulator · 02-26-08, 11:56

Quote:

It would be refreshing to not have debt of any kind--even the type deemed by most as "acceptable."

That's where my wife and I are, zero debt, and yeah, it does make for good peace of mind.

I'll use the Home Equity Line or my margin account from time to time as a cash-flow buffer (up to an amount I can easily pay off), but I simply won't borrow/owe money in the normal sense. I want interest to be something I *earn*, not something I *pay* and I simply don't like the idea of being beholden to others. We're retired, and we plan to stay that way

I realize that this isn't always the *smartest* way to manage money (e.g., 1.9% financing when even a money market account pays more than that)..but it's just the way I want things run in my life.

Pennypacker · 02-26-08, 03:35

Thanks for all the input.

Accumulator, that's most impressive!

I do like the lowest balance first philosophy. I think, however, if I had a large cc balance at 20% or more (compared to 5% on the school loan, for ex.), I'd opt to prioritize based on the rates. Fortunately though, I don't have to contend with that and the rates on the car loan and student loan are about equal, so I think paying the lowest balance first is a good approach.

I'm still debating whether I should sell my car, though. That's a tougher one for me to decide. I'm fairly certain I could get around 21k for it and that would go a long way towards knocking down that student debt. My head is saying one thing and my heart is saying another..

Accumulator · 02-26-08, 05:43

pennypacker- IMO there are intangible things worth paying for, if you can (really) afford the luxury. I've sold cars when that was the "smart" way to raise cash (hey, no hit to the earnings stream, no capital gains.. seemed like a no-brainer), and most of the time I've looked back and decided I woulda been happier if I'd kept the car.

I think there are plenty of subjective things worth paying for as happiness isn't always determined by 100% objective criteria (hah! not by a long shot

). One of those might be keeping a car you like; question is whether that pleasure is worth the additional x% that carrying the debt works out to

Grimm · 02-26-08, 06:13

I think I would pay off the car first since you can claim student loan interest on taxes.