Should I pay off student loan or private loan first?

**theduc** · 02-06-2013, 05:53 AM

if it were me I would pay off the federal loan in full and put the additional $5K toward the private loan... then continue putting the additional $500 (plus what ever you were putting towards the federal loan each month) toward the private loan each month. At that rate you would be able to pay it off in less than 2 years rather than 17 years.

You already have excellent credit so you no longer need these loans for that purpose... Do you currently pay off your credit card each month in full? Between paying off your CC each month in full along with rent and utilities you should be fine for a house.

**jpg7n16** · 02-06-2013, 06:18 AM

Originally posted by theduc View Post

if it were me I would pay off the federal loan in full and put the additional $5K toward the private loan... then continue putting the additional $500 (plus what ever you were putting towards the federal loan each month) toward the private loan each month. At that rate you would be able to pay it off in less than 2 years rather than 17 years.

Agreed.

Originally posted by jmblock22 View Post

Also, I'm looking into buying a house sometime soon (within the next year)

Typically it's suggested that you pay off all your debts, have a 3-6 month EF in place, and have 20% for a downpayment before you're ready to buy a home.

Are you going to be able to do that within a year?

**jmblock22** · 02-06-2013, 09:11 AM

Thanks for the reply!

So you would pay off the federal loan and keep the variable loan? It's 2% lower, but it has the possibility of raising even higher than the federal, no?

Just so you know as well, I can make a payment of appx. $350 - $500 a month on my loans.

and no, I won't be able to have all of my debt paid off in the year... but with the market as low as it is currently and rates at record lows, I imagine that in 3 years or so time that I have to put that up, I will end up losing money due to rising housing costs and increased mortgage rates.

**theduc** · 02-06-2013, 11:59 AM

Most adjustable/variable rate loans have a limit to how much they can go up in a year... in my experience this has been 1% in a 12 month time frame. If this is the case for your's then it would take 2 years for it to be higher than the federal loan. And by that time you would hopefully have the majority of it paid so more and more of your payments will go toward the principal rather than the interest.

so put $15K on the the federal loan and $5K on the private loan and then continue to throw the $350-$500 at it every month... if you can put at least $400/month principal on top of the monthly payment it would take you about 2 1/2 years. Also, one would hope that at some point (or multiple points) over the next 2-3 years you will get a pay raise. If/when you do then put the additional income toward the debt and do not change your lifestyle... i.e., keep living as if you did not get the raise.

you can use the calculator at bankrate to see how much earlier you the loan would be paid off.
Loan Calculator

**jmblock22** · 02-06-2013, 06:16 PM

I have called on my personal loan (through Chase bank which was sold to AES) and apparently there are NO caps on how much the interest rate can change per month, it is completely reflective of the market. She said that she CAN tell me, however, that the rate for the past 6 months has been steadily declining, starting at 4.8% 6 months ago and steadily decreasing every month until the last 2 months, where it has been steady at 4.21%.

Does that affect your answer at all?

**theduc** · 02-07-2013, 08:11 AM

not really... personally I would still pay the federal loan first and then attack the personal loan with everything you can.

Should I pay off student loan or private loan first?