Paying back debt

[rexthedestroyer]

After paying all of my bills, spending money on food and entertainment, I put $1k away monthly towards my savings (I also have a seperate 401k from work which I max out). I think I have a nice amount saved so I am wondering how I should use the additional $1k a month. I just got a new car in which I owe about $25k, but the interest rate I have is 0.9%. I also still owe about $17k on a student loan with an interest rate of 5%. I think I should just take a year and half and pay off my student loans because I'm getting a bit tired of the 20 year repayment plan that I am on. However, it would be nice to be without a car payment in 2 years. Lastly, my third option is start throwing my money towards the stock market/mutual funds (but I know little about this stuff). Any thoughts on what route to take? I'm leaning towards the student loan repayment .

 

[Pilot]

I'd probably split it 75/25 between student loans and car payment, respectively.

 

[AlanC]

Get out of debt.

 

[rexthedestroyer]

Well, with my savings I can pay off all of my current debt, but with a .9% rate on my car, I'd rather keep my savings in my savings account. Yeah, I think I a gonna just finish off paying the student loan.

 

[dragon8]

Originally Posted by rexthedestroyer

Well, with my savings I can pay off all of my current debt, but with a .9% rate on my car, I'd rather keep my savings in my savings account. Yeah, I think I a gonna just finish off paying the student loan.

Thats what I would do.

 

[ajmanouk]

Originally Posted by dragon8

Thats what I would do.

+1

and next time dont by a 25k car?

 

[Dashaansafin]

Lol. 1k a month in savings and he buys a car thats probably worth more than 25k unless he financed it all with debt. Stupid.

 

[rexthedestroyer]

Originally Posted by ajmanouk

+1

and next time dont by a 25k car?

After my downpayment, that is the amount I have left to pay on it...

 

[norcaltransplant]

Originally Posted by rexthedestroyer

After my downpayment, that is the amount I have left to pay on it...

The intent of the reply was to emphasize the financial disconnect between your leftover cash/discretionary income and the debt load incurred by your new, "luxury" automobile. Stick with the Honda, Toyota, Hyundai next time around.

 

[tsacain]

Originally Posted by norcaltransplant

The intent of the reply was to emphasize the financial disconnect between your leftover cash/discretionary income and the debt load incurred by your new, "luxury" automobile. Stick with the Honda, Toyota, Hydundai next time around.

He does make a good point. I HATE being in debt. I would first pay off the student debts or find a job that will. The interest on the car is not horrible but if it was me I would have bought a more affordable car while I still have loans. But for me scratch the Hydundai and add chevy, nissan, and jeep.

 

[kjamesuvic]

easy. start with the student loan, then move to paying off the car. since you don't know that much about the stock market, i would stay away from investing there. watch your consumption on luxury items (like said car).

 

[bdbb]

Originally Posted by norcaltransplant

The intent of the reply was to emphasize the financial disconnect between your leftover cash/discretionary income and the debt load incurred by your new, "luxury" automobile. Stick with the Honda, Toyota, Hyundai next time around.

It's not that big of a deal. Even a ************* Civic losermobile decently equipped is going to come out to about $20k. The extra $5k-$10k spent on getting something nice isn't a bad value. He was probably dumb to get a new car though, and instead should have bought the same thing with 20-30k miles for $20k.

 

[austinite]

Originally Posted by bdbb

It's not that big of a deal. Even a ************* Civic losermobile decently equipped is going to come out to about $20k. The extra $5k-$10k spent on getting something nice isn't a bad value. He was probably dumb to get a new car though, and instead should have bought the same thing with 20-30k miles for $20k.

I like this term.

He actually said that the 25k was after the down payment. So he probably got something in the 30-35k range. That could be a new car or it could be a 2 year old luxury car.

If he can only save $1k/month then he is either living in a very expensive place or is not making much ($30-50k). I would have to agree that it is a little questionable for such a person to get that type of car when $17k in debt. That said, if he can make the payments its not really my business.

 

[otc]

Originally Posted by Dashaansafin

Lol. 1k a month in savings and he buys a car thats probably worth more than 25k unless he financed it all with debt. Stupid.
Wait...wtf are you guys all talking about? he is saving 1k a month after rent/bills/expenses (including the car payment and 401k) and has enough floating in savings right now to pay the debt if he wanted to. If having a nice car is important to him, what is wrong with this picture? I highly doubt somebody making 40k could carry the payments on 20k in student loans, insurance, expenses, and payments on a 30-35k car as well rent in a bigger city while still saving $1k a month. Some of the people on this forum are

levels of out-of-touch. edit: my personal advice would probably be to continue to float those loans...with interest rates that low. you would be far better off hitting your yearly max in a roth IRA before paying down that debt (especially the car debt if it isn't a variable rate loan and the .9 is just a teaser) edit2: I notice you are on a 20-year repayment plan...switch that to a 10 year if you'd like. The accelerated schedule will get you paid up faster but you will still be able to float the money at nice interest rate.

 

[bdbb]

Originally Posted by otc

edit2: I notice you are on a 20-year repayment plan...switch that to a 10 year if you'd like. The accelerated schedule will get you paid up faster but you will still be able to float the money at nice interest rate.

I see no reason to do this as opposed to just paying extra each month on the 20 year plan. You're basically advising him to forfeit free liquidity and a free hedge against potential hyperinflation for nothing in return.