brittney87 Posted March 5, 2013 Share Posted March 5, 2013 * sorry for grammatical errors, my keyboard is a little messed up right now. I am changing the actual figures for security and personal reasons* There are about 11 months remaining on one of our loans. (approx $1500) and because its a loan it obviously has interest. My wife recently went back to school, and its going to cost her approximately $1500 for her courses. Her courses do not start until September, and she is able to make payments towards the school with no interest. Currently, we are making the monthly payment required towards the loan (approx $200) and we plan to pay for my wifes schooling by saving her tips she makes at work. In four months she has made $700 and we have saved an additional $400. ($1100 in total) This is my idea please tell me if this makes the most sense. I feel that we should take the $1100 we have now, and put it towards the loan. It will leave approx $400 left on the loan which is basically 2 payments. Once those 2 payments are paid (April), we can take the monthly amount we were paying towards to the loan ($200)and put it towards her schooling instead. So from May-September we would save $1000 ( 5 months x 200$) plus whatever tips she made from now until September. Does it make sense to do it this way or should we leave things the way we are doing them already. I have already checked with our bank to confirm there are no fees for paying the loan early. Link to comment
avman Posted March 5, 2013 Share Posted March 5, 2013 Do you have any other emergency funds available other then that $1,100? If not I'd say don't wipe it out to pay off the loan unless the interest rate is astronomical. If you do have some other way to cover an emergency expense then yep your plan makes sense. Link to comment
lilypadgirl Posted March 5, 2013 Share Posted March 5, 2013 Unless you have a dire need for that cash to go to something else (rent, food, etc) and there's no fee to paying the loan early, you should pay off debt earlier rather than later because of the accrued interest. So in your case, your plan to pay off the loan earlier and save for the class is the better choice. Link to comment
abitbroken Posted March 5, 2013 Share Posted March 5, 2013 I think you should pay the loan like you say. That way you have no monthly payment over your heads and if she needs to cut back at work after class starts, you won't be in the lurch. After you save the money for her class and have it paid, continue putting $200 in an emergency fund every month regardless of when the loan would have been paid off. Link to comment
brittney87 Posted March 5, 2013 Author Share Posted March 5, 2013 thank you for both of your replies, this is where I am still conflicted. It has been our experience that if we have the money saved, nothing bad happens. If we dont have money saved, bad stuff happens over and over.. Kind of like with an electronic, if you buy the extra warranty you dont need it and if you dont, it breaks within a week. My wife fears that if we clear the emergency fund that something will happen and we wont have money to pay for it. Link to comment
EssexMan Posted March 5, 2013 Share Posted March 5, 2013 Well, do you have sufficiently good credit/circumstances that if you paid off the loan and then needed the money for an emergency, you could borrow it again? Link to comment
brittney87 Posted March 5, 2013 Author Share Posted March 5, 2013 No, Would not be able to borrow again...I have also considered putting half of the $1100 (550) towards the loan so that we still have a partial emergency fund, but $550 is only like 2.5 payments so we would still have multiple payments to make towards the loan, so it almost seems pointless.. Link to comment
lilypadgirl Posted March 5, 2013 Share Posted March 5, 2013 Any bit helps because then you'll be paying interest on only $550+$400 instead of $1100+$400. Depending on how high your interest is (which on most loans are pretty high) you can still be saving on interest by paying off your debt partially. Link to comment
abitbroken Posted March 5, 2013 Share Posted March 5, 2013 thank you for both of your replies, this is where I am still conflicted. It has been our experience that if we have the money saved, nothing bad happens. If we dont have money saved, bad stuff happens over and over.. Kind of like with an electronic, if you buy the extra warranty you dont need it and if you dont, it breaks within a week. My wife fears that if we clear the emergency fund that something will happen and we wont have money to pay for it. The key is to have a situation where there are fewer bills so there are fewer emergencies. Say she is sick and can't wait tables for a month. It is only tragic if you have a lot of bills. If you no longer have a $200 student loan bill and say no longer have two $30 credit card payments, its not nearly so bad, is it? It ends up being a non emergency. Worst case scenario, she does the class a semester later or a month later depending on how the class enrollment runs if a REAL emergency happens. Link to comment
EssexMan Posted March 5, 2013 Share Posted March 5, 2013 Yes, paying off half is a lot better than paying off nothing. If I'm reading your post correctly, you have 11x$200 (=$2200) payments to make on a loan with $1500 outstanding, which means you are facing $700 in interest payments ($2200-$1500). So, wiping out half the loan will save you $350 (half of $700) over about six months. If this is a loan where the payments vary month to month ignore me, because my math won't apply. Link to comment
brittney87 Posted March 5, 2013 Author Share Posted March 5, 2013 Your math is correct thank you. Thank you all for your posts. I am going to talk this over with my wife once more and see if we can come up with a plan and put it into action. Link to comment
Ayanokōji Posted March 5, 2013 Share Posted March 5, 2013 $1500 is a very very small price to pay for higher education (after high school education), what kind of new job/promotion is she expecting after she completes this course? Or is she just taking it because she wants to? Then I'd suggest paying off the debt first. Link to comment
brittney87 Posted March 6, 2013 Author Share Posted March 6, 2013 Well she was forced out of high school when she was a teen, so right now she is completing her high school and working multiple jobs, and then in september she is taking personal support worker courses... So it will be a big advancement. She will go from working at minimum wage to being a psw. the going rate for a psw in our area is anywhere from 15-25$ / hour. Link to comment
rosasnyder811 Posted March 6, 2013 Share Posted March 6, 2013 check out Dave Ramsay. I was in trouble years ago and his methods helped me. I have since done away with all credit cards, and have been attacking my loans like crazy. It feels great, and guess what? I actually have MORE buying power without credit cards. Link to comment
rosasnyder811 Posted March 6, 2013 Share Posted March 6, 2013 I will state that it is always good to have at MINIMUM 1000.00 in your savings account for emergencies. I would keep 1000 of it, and just attack that loan like crazy with everything else you got. Make a budget. Link to comment
brittney87 Posted March 6, 2013 Author Share Posted March 6, 2013 thanks, I tend to gravitate towards gail vaz oxlade and her money saving methods but i have briefly looked into Dave Ramsey. I am extremely happy that we no longer have credit cards, just the loan..I do make monthly budgets, track expenses, and use coupons to try and stretch my dollars as far as possible, but getting the wife to stick to it can be a pretty exhausting task. I am usually pretty smart with money, friends and family usually turn to me for answers, but I am horrible at taking my own advice even when I know it is what needs to be done. Thank you all. Link to comment
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