Wednesday, 21 January 2009

Need advice...

I'm having a "moment." One of those where my debt is starting to become a nag and I'm debating about putting some of my savings towards it to knock it down, although I know this is generally a bad idea, depending on what savings we're talking about.

My remaining debt stands at $7585 (more or less). My student loan is $2982, my LOC $4602. Both have the exact same interest rate - 6%. I have just over $1K sitting in my house down payment account and I'm debating whether or not it's worth it to pay off some of that nagging debt.

The student loan is a fixed loan, the LOC a revolving loan. As I would want to clear the debt, if I did do this, I would put the cash onto the student loan and just work on getting rid of it.

Soooo the question is: Is this something I should do or not? Advice & ideas welcome! :P


Brandi said...

I guess my best advice for you would be this:

What is gonna make you feel better? Is it worth having to wait a little longer to save for the down payment so you can get that feeling of making some progress?

Sometimes when you're getting anxious its almost best to find a compromise. Maybe take SOME of that down payment money and pay down some debt. Just so you get that satisfaction, but you also don't have to feel like you're draining something else that's important to you.

On my personal plan (I'm a Dave Ramsey follower) I told myself NO house savings until the debt is at least paid 80%. That is at LEAST two years away. I also am only 25 so I have some room to wiggle around with.

Do what will give you the greatest long term satisfaction! Good luck and thanks for stoppin by my site!

Anonymous said...

Do you have an EF? or just the 1k saved for a house down payment? Or is the 1k accessible, incase you did have an unexpected expense come up?

Reason I ask is, you need to have an EF or some available cash. If you use all your savings to pay off your debt, and then an emergency did arise, you would be forced to use credit cards.

If you have an EF already. And this 1k i just "extra" savings - then yes, I would agree to apply it towards debt.

Just my 2 cents! ;) Let us know what you decide to do!

Money Funk said...

Here's my thoughts... ;) Or I should say, this is what I do:

I have my EF at 1K. You have this yes? At least?

I take 1/2 of it and pay down a debt/cc bill. That way, I still have 1/2 of an EF to cover my toosh. Each month $100 is automatically funded from my account back into my EF account (banks terms for me to not be charged a monthly fee). When EF hits 1K again, lather, rinse, repeat.

And it fills that nagging. I would say... take that house savings and put a half into that debt. This way, you still feel you have a small down payment to still nourish and erradicated some debt.

Okay, my rambling thoughts. Hope they help!

Sharon Rose said...

Hi there-I think Christines advice is good, hope you find a realistic goal for yourself.

dinah34 said...

i would take some of the money out of the house fund (maybe 200-300) and apply that towards your debt. maybe take 200 out of your EF and apply it towards your debt.

i would not take it all.

Money Minder said...

I agree with Frugal Dreamer, if you have an emergency fund, then go ahead and use some/all of the house money for the will replace it very quickly once the debt payments are gone.

Anonymous said...

If you do use the savings to pay off the loan, I might suggest putting it on the LoC instead of the student loan - just because the interest you pay on the student loan is a tax deduction.

BTW - love your blog.

Anonymous said...

I would put some money toward debt. I'm just that way. I need some kind of emotional reward for not spending money. I love to pay a big chunk down. Of course I don't have much of savings right now and if anything were to happen...

Saver Queen said...

I agree with Frugal Dreamer. If you have an EF in place, go ahead and use the DP fund to pay it down. it will be worth it in the end because of the interest you'll save. If you only have the DP fund and no, EF, leave it be because you'll need it eventually.

Anonymous said...

i was unconventional in my debt payoff - i had no savings. i threw everything at debt, and banked on credit cards for emergencies (it works out the same in the end, if the cards are 0%). i had no emergencies, luckily, and once i was out of debt, the EF (and beyond) built up extremely fast.

one thing to consider is if the interest on your house account is higher or lower than the interest on your debt... also, if you do get to deduct interest for student loans, then definitely pay the other one off first.

finances are very personal and emotional. i find that sitting down with what i am feeling about these things and really just exploring them makes me see the situation better. it's kind of like when you crave that big bar of chocolate. instead of indulging, you take a walk. if you still crave it, then you try a little piece (and take another walk). if you're still craving it, then maybe another piece (and walk). if, after 3-5 times of this, you still want it, then you just eat the whole thing and be done with it. :)