Credit Repair and 0% loan

[outsicktoday]

OK, so I have a 0% car lolan that I owe about 16,000 on for another 3.5 years. I was thinking of paying it off just to have the extra 390 per month in my pocket and ease some short term stress.

Finances are stressed because I'm paying off student loans early with large payments, so my 30 year loan is going to disappear this year after about 4 years of tough budgeting. I have another that will be gone 4 years after that with the same plan.

After that all I owe is the house. I lost another house that I used to live in to foreclosure (planned due to being 100,000 upside down on it) recently.

I know all the arguments about not paying off the loan early and calculated that the interest I would lose would be low. I have $60,000 in a savings fund and another &10,000 in another so I can pay off the $16,000 and not put myself at risk. I would compulsively want to save back the money to the accounts later.

One concern I have is the credit repair. Is it worth it credit wise to keep the installment payment or just pay it off. I have a slew of credit cards that I keep at zero but use every now and again to keep them fresh, just pay them off at the end of every month.

Is it better for the credit to have no payment to make on the car and no balance or to have the positive reporting history of paying it off.

I also want the extra cash each month to help pay for expenses due to having two young kids and for unexpected costs. But I also thought that I could go 390 in the hole each month for 3.5 years and still have the same left over in savings, and maybe more because I still contribute about $100 a month towards it.

So I want to reduce my "owing" to from house, car, student loans to house, student loans with some extra cash each month. $400 each month would help a lot. I am putting 2, 3, sometimes 4,000 a month to student loans. I've been using the avalanche method to pay off debt and I know paying off the 0% car loan is heretical to that and saves nothing long term.

However a little extra now sounds so good. Another concern is that I just waste the extra cash on excess. Current budget is working ok.

So this AM I almost sent the payoff amount out. Would you?

Here's what stopped me. If I can wait three months, I save 1200 in my account, if I can wait 6, then its 2400. The 390 payments are ongoing and they take away from the amount owed dollar for dollar. If I can wait a year it's about 5 grand. So I thought, wait a year and then pay off the 10-11 owed if I want to then.

Or I could stop student loan payments and pay off the loan completely and then go back, have the same amount in the bank with no payments. I would lose some benefit of putting the 15,000 to the student loans which do go up.

So you're in my spot, what do you do?

[siggy_freud]

What percent interest are your student loans at, and how much do you owe? 0% is free money, and if your loans are even at 1%, you'd save more money paying them down first.

[outsicktoday]

Two savings accounts: One with bank thats really the emergency funt at 10,000 another outside account with higher interest (still just below 1%) at about 60,000. I keep them separate, one is the emergency, one is for long term savings.

I'm a Gov worker so retirement is going to come from that type of system, not worried there.

Monthly expenses are about 10-11,000 or so total (actual amount that I spend on everything per month) includes all my debt payments, so without student loan extra payments my expenses are more like 6-7, so three months worth would be about 30,000 or so, or about half of what I have.

Call me a hoarded, but I like to keep that money in the account and add to it. So I woud only throw the money at a debt that would lead to greater monthly flexibility.

I owe about 20,000 on one student loan at 7.8% and another larger loan at $105,000 with rates that go from 2-5%. My $20,000 loan was at that mark (a little over $100,000 3 years ago but I have paid it down to the mark it's at now).

So i am fine with the student loans, in 5 years they will all be paid off completely and then I am hoping to have only the house to concentrate on (that's at 5%). I can't refi the house to lower due to the foreclosure, i have to wait a couple years, So rates please stay low.

I know I could save the money or put it towards a loan with interest, but this would increase my monthly available funds by almost 400 a month. I could either save that money back, send it to loans, or spend it as needed.

Such a predicament, I want to keep the money and have things paid off. Tricky situation, but I'm leaning towards paying off the car and saving back the money over time to the savings or sending that money to student loans.

I have also thought of keeping the money, paying off my $20,000 loan as I am doing and then sending $30,000 to the large student loan to turbo boost paying that off.

I like not having any car payment and hate sending that money in. I would rather pay that off and just have the loans and the house.

[outsicktoday]

Another thought, my paln long term was to maybe have everything (except the house) paid off with $100,000 in the bank, paying off the car note early would cramp that. I suppose it's a pointless goal, but it makes the short term pain a little easier to bear if I can imagine a bigger payoff later.

[outsicktoday]

Student loans are also, not so bad, if you lose your job they can't take anything really, whereas if you keep your job and manage your finances you just pay them off early. So either way is a win.

That car note though, has to be paid no matter what (and the house too) or they eventually take those, so they have more importance. My wife is a teacher and that's partly why her loans are being paid later (she could get laid off) and they are lower rate and not as old as mine.

If she gets laid off, then the car still has to be paid, the student loans (and maybenot even the house loan these days)do not.

[outsicktoday]

Decision

In case anyone is wondering or cares. I decided to pay off the car loan to have the extra 390 a month.

So that eliminated one debt, leaving me with only student loans and a house payment, with intact jobs about 50,000 still in savings

So I think this is a good idea and will try and save the money each month, but very hard to do with two little kids who grow out of clothes every second........that was the real reason, needed more money per month just to ease some tension and still pay off the other debt at the same level.

Otherwise I would have been cutting into debt.

So NO NEW CARS until student loans are paid off completely (4 years)

After that all bets are off, Im getting a new truck and I bet the wife will want something too.

[woodie96]

Hindsight is 20/20, but would you have saved more money by paying that 16K on the student loan at 7.8% rather than the 0% auto loan.

Now that the car is paid off, I would seriously consider paying off that 20K student loan. With the car payment gone, and the one student loan gone, you could boost your savings up back rather quickly, even as you pay on the larger student loan.

The cost of the compounded interest over what you are earning in a savings account is night and day.

As long as you feel that you have enough in the emergency fund, coupled with the regular savings account, it would sure benefit you (about $1600) to pay off the 20K student loan.

JMHO...