Need advice on next phase

iVillage Member
Registered: 04-10-2003
Need advice on next phase
5
Tue, 11-15-2011 - 6:44pm

Firstly I just want to thank you all for your kind words and encouragement regarding the CC debt. The supportive atmosphere and group celebrations are what has made me stick around even during the rough patches!

So now I am already thinking about the next phase. Once I pay off the small student loan (should happen before the end of the year) I am left with:

Car loan: $11k at 0.9% interest, $140 bi weekly until January 2015

Large student loan: $23K at prime + 2.5% interest, $225 a month for 117 months (HA). I will pay $275 (snowballing in the small student loan payment). Interest is a tax credit (at 15%) so I get back 150 for every 1000 in interest.

My instinct was to just do what I`m currently donig and throw every little bit extra at it. However, I`m liking the idea of bulking up my retirement funds. I have over $30k in contribution room for my RRSPs (I`ve been working since I was 14). So part of me is tempted to throw everything in RRSPs and then take the 40% return and do a once a year lump sum payment. This will significantly reduce my payoff time, but will allow me to build up my retirement funds at an early age so that compounding interest can do its thing.

What do you think. I can see the pros and cons in both , , ,


Bex -

Community Leader
Registered: 08-25-2006
Fri, 11-18-2011 - 2:40pm
I don't know what you should do, but I do know that like Marie said, any debt can hinder future options and/or choices.

I am no expert, but I would think since you are so young, do the minimum optimal contribution to retirement and put the as much as you can on your unsecured debt.

I might be wrong, but that is my thought. Student loans may be worth the cost in the long run, but they are still unsecured and still a debt and still on your credit report.

Just my two cents.

Serenity
iVillage Member
Registered: 12-31-2010
Wed, 11-16-2011 - 2:26pm

I do get that you want the power of compound interest, but I also firmly beleive that any debt limits our possibilities for future choice.

With your bonus, I would divide it by half if you can or put it all into retirement savings if you can't.

But after that why not just make the student loan a bill of $500 a month until it is paid off and if you can, bump up the retirement a little more.

#Marie
iVillage Member
Registered: 11-14-2008
Wed, 11-16-2011 - 12:04pm

I would like to say that I would boost the retirement savings and put the refund on the student loan. I don't know if I would, but I think that is way it should be done. As long as you can stick to that it is probably the right way to go.

iVillage Member
Registered: 05-08-2006
Tue, 11-15-2011 - 8:59pm
I would go withbthe retirement savings. Your car lone is costing you very little in interest, and although I didn't totally do the math, I think you bare nit paying that much for your student loan right now. Interest rates are low and I think they will stay that way for a while and you are close enough to the end that an increase would not affect you much.

The things you owe for are things with value - after you pay off your car you can save and never have a car loan again. You use your education. This is 'good' debt - no debt will be better but channeling to savings is a good option in my opinion.

SJ
iVillage Member
Registered: 04-10-2003
Tue, 11-15-2011 - 6:45pm

PS - NOt trying to be obessesive about this. I just have to make a decision by thursday whether or not to transfer some or all of my bonus into the group RRSP or take it out as cash (subject to income tax of course !)


Bex -