Your Questions About Save Loan

Donna asks…

Pay my student loans off and rent or save for a house?

I was wondering if it is a better investment to pay off my student loans and rent for longer or save for a house and rent for a shorter period of time. My loans are about 18,000 @ 6.8. My finance loans are about 20,000 @ 8.0 . Between the two of us we will make about 79,000 a year.

Also should we consolidate our loans when we get out of school. I hear that this can get you a lower rate and that the interest rate on student loans can be a tax deduction.
We both have excellent credit and no credit card debt. He has a car payment that is 150.00 a month.
I am afraid that the extra money I paid into my student loans would be used better in investing it into a house but if I factor in the renting part I am not sure. Renting is throwing away your money.
If you don’t have 20% down on a house you have to get mortgage insurance and it never goes away. I am trying to find the balance.
I think that saving for a house is better then paying off my loans.

1. If I save 20% of what I need for a house it will save me tons in mortgage insurance. This translates to thousands of dollars. More then I would save on paying off my student loans and saving on interest because the home loan is so much larger.

2.It shortens the time period I have to rent. Renting is waisting money. Their is no investment in doing that. So just saving for a house will make my renting period shorter.

3. In the end if I do pay my loan off in a ten year period we will only pay $ 12,000 in interest. This sounds like a lot but I will have waisted at least $500.00 (that is a cheap apartment) a month for at least 5 years. That is 60,000 in waisted money.

4. There is no penalty for paying my loans off in a ten year period. My debt ratio is less then 8% and that should not hurt my ability to get a loan.
Yes I know ten years is a long time to pay off a loan but its logical to invest the money.

John answers:

Definately consolidate your loans if you can. The feds adjust the interest rate every year, so you can end up paying more in the long run. I consolidated mine a few years back at 5.5%… And I have over 25K of student loans. It’s always a good investment to buy a house, especially in this market. Plus, student loan repayment schedules are always pretty low (mine is like $115 a month) and you can always pay more if you want. If you can afford it I would definately say buy now. And yes, student loan interest is tax deductible (so is mortgage interest).

Helen asks…

Pay off Student Loan $15K/2.875% or Save Up 40K for House?

28, Male, No Wife/Kids/Mortgage/CarPymt. I have all my money in my checking account, which is about $8K, I can save about $2K a month. I net $4-5/month.

What I want to do:
Don’t pay off student loan, 100% finance house, have “saved” up money as “fix-up-house” money or just as general slush fund that goes along with buying house.

John answers:

Save for the house – don’t do 100% and, really, that kind of loan isn’t out there anymore. You’ll get lower cost financing and you’ll avoid private mortgage insurance premiums at or below 80% financing.

Pay extra on the student loan if you wish, but that’s cheap money. You can earn more on your savings if you shop around.

Money you pay on the loan is money you can’t get back if you need it later.

Thomas asks…

Save the money or take a loan? Read inside.?

I am a young engaged woman still living with my parents. Things are very rocky between myself and my father. My fiance and I need about $2k for wedding expenses and first months rent/deposit for a place to live. My mother really wants me to stay at home and save the money before the wedding. However I’m very tired of the constant fights at home. I understand if I took a loan I would be in debt (I have none so far) but I very much want to get away from the hard feelings at home. Should I take the loan? Or save the money?

John answers:

Save the money it shouldn’t take that long, and you may need to save your ‘loan’ for something a little bigger!

Steven asks…

Pay off student loans or save for down payment on a house?

I have about 100k in student loan (interest rate 6.8% fixed). Interestingly, I estimate that my expected saving in the next two years after living and other expenses to also be 100k. Houses are expensive in my area, currently an average single family home are around 500k (or maybe more), banks now typically ask for 20% down payment, so I need to save 100k before I can purchase a home.

So the question is, should I use my excess income to pay down my student loan or save for a house?

John answers:

Pay off student loans.

Student loans can not be discharged in bankruptcy. They are with you until you pay them off. So, if your job situation took a drastic turn for the worse in a few years…you’d still have to contend with those loans. But, if you are in a strong job situation and can pay those loans off… will never have to worry about them again.

I’d focus on knocking that student loan debt out. Once that’s paid off, you will be in a much stronger position to buy a house b/c you will have one less monthly bill (which means you can afford a larger mortgage or save that money) and your credit rating will be higher once that debt is paid off.

I paid off my student loans before I purchased my house.

Jenny asks…

Need a bank Loan?

Ok im almost 19 and ive found the car i want. I need 5000 within the next 3 days to get it or itll be gone. I just started myjob 2 weeks ago and am gettin my first paycheck of 1000 for the first week. Will i be able to get this loan through a bank? If not is there any other way? Cash land or somethin? Dunno how those things work. Serious answers only please im runnin out of time.

John answers:

Try a bank, or saving and loan, Have your boss verify your job, and that you plan on being around for quite a while, Or you will have to have something to back up a loan of this amount or a co signer
good luck

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