Debt Question

[skives]

My wife and I just got estimates on our cars to get them fixed. They both have rust issues. The total came to $3,500. We have $10,000 in our EF fund. We also pay on a student loan of mine with whatever money we have left over at the end of the month, which is $1,000. We are paid ahead on the student loan till 8/21/14 and this is our only debt.

My question is should I pay back the money to our EF and stop paying on my student loan or just keep paying on the student loan and not pay the money back to the student loan?

Another question as far as my jeep which is about $2,000 out of the $3,500. The rust issues on it don't necessarily need to be repaired I just figure I should have them fixed before the body rusts out. Plus I put a new motor in it 2.5 years ago. Should I spend the money to get it fixed?

[skives]

Just under $30,000.

[theduc]

Have you just been making additional payments to your student loan or have you been paying additional principal (there is a BIG difference)?

If you've been making extra payments and your next scheduled payment is not until August of 2014 then you could possibly take a couple months off of that and pay for the repairs needed. I would then recommend NOT paying ahead each payment and to start adding additional principal to each payment that you send in... Adding additional principal will reduce the amount of interest you are going to pay, if you are just sending in your payments early then a large portion of it will still be going to interest alone.

For example: If your regular payment is $100/month and lets just say that 50% of the payment is interest. If you can afford to pay $1,000/month then in one month you could either make 10 months worth of payments with a total of $500 going to pay off your actual loan and the other $500 going to interest (because you are only making early payments... not principal payments) OR you could make one $100 payment with an additional $900 in principal... Doing the later would reduce your principal by $950 out of your $1,000 paid rather than the $500 from the first. BIG difference!

[bjl584]

I probably wouldn't get the rust fixed unless it was a safety issue or if it would prevent the vehicles from passing inspection.

[skives]

I am paying additional principal on the student loan. They just happen to advance the due date for me.

The rust isn't a safety issue but I figure that with the new motor the jeep would last 15 + years so why not fix the rust so the motor doesn't out last the body.

[disneysteve]

I am paying additional principal on the student loan. They just happen to advance the due date for me.

If your extra payments were truly going to principal, it wouldn't affect the due date of the next payment. You should call them and verify that your extra payments are in fact going to principal.

[skives]

If your extra payments were truly going to principal, it wouldn't affect the due date of the next payment. You should call them and verify that your extra payments are in fact going to principal.

My extra payments are going to principal. I have the choice of advancing the due date or not. I can see on their website the break down of the payment is.

[disneysteve]

My extra payments are going to principal. I have the choice of advancing the due date or not. I can see on their website the break down of the payment is.

That's interesting. How can you advance the due date if you haven't made extra payments?

[skives]

That's interesting. How can you advance the due date if you haven't made extra payments?

I don't know it just gives me the option to. Like my last payment of almost $4,000 advanced the due date from 8/21/13 to 10/21/14.

[mgkimsal]

Did the principal go down in one big chunk in one month? I've never had a loan that operates the way you say yours is operating. Can't say it could never happen, but I've never seen or had one like that.

[disneysteve]

I don't know it just gives me the option to. Like my last payment of almost $4,000 advanced the due date from 8/21/13 to 10/21/14.

Very strange. They say they aren't counting the $4,000 as an advance payment but then they're moving the next due date which means they are counting is as advance payment but at the same time are dropping the principal by the amount of the extra payment. Something doesn't add up there. Obviously, the loan will be repaid early. I just wonder if you will truly have saved any interest in the end.

[skives]

I've had a loan before that acted this way. Anyway back to the original question what do you guys and gals think I should do?

[mgkimsal]

if it was me, I'd probably

1. get more estimates (assuming you'd done that but you didn't say so).

2. get one car done now, plan for another in 4-6 months, and save aggressively in the EF for that.

3. Re-evaluate your attitude toward the fix after 4-6 months. I don't know the condition, but 'rust' may or may not be much of an issue, and on top of that, a lot of life can happen in the 4-6 months that may be more important than the rust.

[disneysteve]

I've had a loan before that acted this way. Anyway back to the original question what do you guys and gals think I should do?

I would temporarily stop the extra payments on the student loan, use that money to pay for the repairs, and not touch the emergency fund. If the repairs are urgent, dip into the EF to the extent necessary to get the cars in safe working order again and then replenish the EF by not making the extra loan payments for a bit.

[franciswilks21]

hello

You should think of first on what is your priority. Think twice on which things you can benefit a lot and if it will not cost you a headche someday.