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Paying off Credit Card vs. Student Loan
Kyougu
Registered User regular
Registered User regular
Just want to got some of you all opinions.
I have admittedly not been great about money, and ended up racking a lot of CC debt, not to mention Student Debt when I was younger. I have thankfully gotten much better about things and specially paying things off, and now I'm just down to one credit card and student loan debt. Both are around 6 grand each.
I actually been saving up and I should be able to pay off one of them within a month or so. Just trying to figure out which one.
For my Student debt, the loans are all through the gov so the interest is low comparatibly. I pay 350 a month, and the interest seems to be around 20 dollars.
For my credit card I have a couple of recurring payments set up for it, and I always pay those off + any one off expenses + the interest of the month. Usually the interest is about 100 dollars.
I know you want to pay off whatever has higher interest rate first, so CC seems like the obvious answer, but if I pay off my student debt, I could then put the 350 I was paying towards the credit card.
Thoughts?
I have admittedly not been great about money, and ended up racking a lot of CC debt, not to mention Student Debt when I was younger. I have thankfully gotten much better about things and specially paying things off, and now I'm just down to one credit card and student loan debt. Both are around 6 grand each.
I actually been saving up and I should be able to pay off one of them within a month or so. Just trying to figure out which one.
For my Student debt, the loans are all through the gov so the interest is low comparatibly. I pay 350 a month, and the interest seems to be around 20 dollars.
For my credit card I have a couple of recurring payments set up for it, and I always pay those off + any one off expenses + the interest of the month. Usually the interest is about 100 dollars.
I know you want to pay off whatever has higher interest rate first, so CC seems like the obvious answer, but if I pay off my student debt, I could then put the 350 I was paying towards the credit card.
Thoughts?
0
Posts
However convention wisdom doesn't take into account how human beings handle stress and all that, so if one has a smaller interest but a much smaller balance, paying that one off first can actually reinforce good spending habits going forward.
If your CC's balance is like $10k, but your student loan is $2.5k, maybe pay off the student loan asap instead. If they're nearly 1:1 pay the higher interest one down first.
Pay off the credit card(s) ASAP. Very few types of debt are worse than credit card debt. Payday loans are probably the worst, but credit card debt isn't all that far behind.
Also, if you've been "saving up", it implies that you have more than enough to pay off the debt already. If possible, I'd strongly consider paying off the credit card debt now and rebuilding your nest egg sooner rather than later. Right now the money in your account is very much of the "pretend" variety. If you run into financial trouble, you'd be better off just starting up new CC debt with a clean slate (i.e., a card with no balance) rather than carrying over that long-term CC debt that is constantly piling up interest over time. This assumes you'd still be keeping enough cash-on-hand (e.g., in your bank account) to do stuff like pay for rent, etc.
In case no one has said it already: You are a badass for taking care of your finances and paying off these debts. Go stand in front of your bathroom mirror and tell yourself how much of a fucking badass you are.
But note that the 6 month Covid-19 forbearance for everyone right now still counts toward forgiveness with no gap.
Now, I'm not saying pay them off and then go max them out on a new home theater system, I'm saying pay them off because the second you get yourself overextended your check engine light is going to come on and the credit card will at least give you a way to pay for that.
Unfortunately this depends on the loan. I thought this was a blanket thing that applied to all federal student loans. As my loan servicer is happy to tell me "The CARES Act provides relief to all Direct Loans and FFEL program loans owned by the U.S. Department of Education (ED) until September 30, 2020." My wife and I both have federal student loans through the FFEL program, but they are listed as being owned by "Navient Federal Loan Trust" and "PHEAA FRN" and so aren't eligible because they are not owned by the Department of Ed.
Also, we have a Personal Finance / Financial Literacy Thread . All are invited!
Honestly it felt scary transferring 7k from my savings to my checking and making that payment but now I just have my student loans and I'll be 100% debt free.
A few years ago I was in a real scary place finance wise, and I am so thankful that through a combo of luck and discipline I was able to finally get to a place where I'm 100% debt free.
Amazing, great job! Being out of that debt is a huge piece of mind. If you are able to start building up a one and then three-month emergency fund you will be even better set.