Looking for your advice

[cashisking500]

I didn't get any response in the Debt forum, so I'm trying here....


In August, we paid off our Personal Loan (hooray!). So now we have the two car loans and the student loans left to tackle. Since then we've also had a visit from Murphy and had to replace our water softener.

Here's our current situation...
Car loan 1: Approx. 12,700 balance @ 4.5%
Car loan 2: Approx. 12,000 balance @ 4.25%
Student Loan: One loan split into two parts...Part 1: $1600, Part 2: $4500...both very low interest

Our EF will be back to 10k at the end of this month! So, it brings up another round of questions...

1) Should we stash away cash into the EF? I project by next summer we could have 20k (God willing!)in our EF and could pull from that to pay off the projected balance on the higher interest car loan we have (roughly $9k to pay it off by July).

2) Should we split the difference and contribute $300 per month to savings and the balance of what's left (could be up to $700 per month now in most months) towards the highest interest car loan?

3) Should we stop contributing to the EF and put every extra penny into paying off the car loan?

It's important to us to get this car loan paid off by next summer as my wife drives a lot for her job and I don't want to be paying on a car with 120k miles on it.

As always, thanks for your help!

cashisking500

[feh]

Our EF will be back to 10k at the end of this month! So, it brings up another round of questions...

How secure are your job(s)? How many months of expenses does $10K represent?

[cashisking500]

Hi, thanks for responding.

Our jobs are about as secure as they can be. The 10k represents almost 3 months of expenses (about 2.5).

[disneysteve]

Should we stash away cash into the EF? I project by next summer we could have 20k

What are your monthly expenses? How much do you need for a 3-month EF?

Should we split the difference and contribute $300 per month to savings and the balance of what's left (could be up to $700 per month now in most months) towards the highest interest car loan?

I think a balance approach is always a good idea. Going all or nothing doesn't usually make sense.

Should we stop contributing to the EF and put every extra penny into paying off the car loan?

I think that depends on how large of an EF you need. If 10K would cover at least 3 months of expenses, I see nothing wrong with stopping there and focusing on the debts.

It's important to us to get this car loan paid off by next summer as my wife drives a lot for her job and I don't want to be paying on a car with 120k miles on it.

Other than the emotional aspect, it doesn't really matter how many miles are on the car. That has no bearing on the loan itself but I get what you're saying.


cashisking500[/QUOTE]

[feh]

Hi, thanks for responding.

Our jobs are about as secure as they can be. The 10k represents almost 3 months of expenses (about 2.5).

In that case, I'd throw the majority of your monthly surplus at the car loans.

[LivingAlmostLarge]

To the car loans! 3 month EF is pretty good.

[Wino]

I think your emergency fund is too large for you right now. I would stop putting everything into it, and further, I would probably pay off the two student loans, keeping one month's expenses in the fund. I would then put all of my efforts into paying off car one followed by car two. You hinted that you can save $10K while paying loans in about 8 to 9 months ("next summer"), so without the student loans, you should probably be able to have only one car payment by then. I would say that within 1.5 years, you would be debt free, at which time you can rebuild your emergency fund to whatever level makes you comfortable, as well as the down payment savings, and any college funds for the kiddies.

In short, in 1.5 years, you could be pretty much set up to do anything you want with your income, and have nothing beholden to creditors.

Edit: I always suggest paying student loans first, because they cannot be relieved by bankruptcy. Interest rates are a secondary consideration for them, because, like luggage, they're there forever until you take positive steps to get rid of them.

[cashisking500]

Thank you all for your feedback. I'll keep you posted on our progress. Reading posts on this forum really helps to keep us motivated!