Pay off debt or keep money in savings?

posted 3 years ago in Money
  • poll: What would you do?
    Option 1 : (27 votes)
    36 %
    Option 2 : (2 votes)
    3 %
    Option 3 : (46 votes)
    61 %
  • Post # 3
    6812 posts
    Busy Beekeeper
    • Wedding: June 2014

    What is the interest you’re paying on the student loans? Are you getting any sort of loan forgiveness for them? What is the interest you would get in savings?

    Dave Ramsey would say to pay off the loans.

    But, do you have anything else you could do with the $30k other than savings?

    Post # 4
    2878 posts
    Sugar bee

    It depends on the interests on both savings and debts. And personally, I wouldn’t entirely use the 30K in savings to pay off the debt. I would rather go 50-50 or plan a reimbursement budget over X months rather than empty all my savings. 

    Post # 5
    802 posts
    Busy bee
    • Wedding: August 2015 - Backyard Forest

    I would probably put $20K on the debt, and then start making larger than minimum payments on the remainder of the debt.

    Post # 6
    11593 posts
    Sugar Beekeeper
    • Wedding: November 1999

    I wouldn’t empty my savings to pay off loans, but I would be making sizeable additional payments to pay down the loans a lot faster.

    Post # 7
    1367 posts
    Bumble bee
    • Wedding: September 2013

    I would put $20K against debt, keep 10 in savings and try really, really hard to have it paid off within 2 years.

    Post # 8
    889 posts
    Busy bee
    • Wedding: July 2014

    @MissGeeBee:  well usually you’d pay much higher interest rates on your loans than you’re getting on your savings. Otherwise the system of banks could not function. im not familiar with current interest rates in the US, but let’s say you’re getting 1.5% on your savings and paying 5% on your loans. Than you’re getting 450$ a year, paying back 1,500$ a year. The solution should be quite simple 😉 

    but if course it depends on your personal details. Maybe you’re getting awesome rates (high in savings and low on loans). Also for the loan, with certain types you’re only allowed to pay back a certain amount per year and it would cost quite a lot to pay it back before that. Do the math. But generally you will be burning money keeping money in savings instead of paying off debt. 

    If you’re planning to make major investments though it may of course be wise to keep part if the savings. We don’t know enough details here. 

    Post # 9
    4483 posts
    Honey bee
    • Wedding: April 2015

    I would leave a rainy day fund and use the rest to pay off the debt

    Post # 10
    1801 posts
    Buzzing bee
    • Wedding: May 2014

    I picked option 1 because it’s the closest to what I would actually do: keep $3-4K in savings, throw the rest at the debt. I don’t need $15k in savings if I’m still $15k in debt. 

    Post # 11
    4757 posts
    Honey bee
    • Wedding: September 2013

    I would pay off the loans, minus maybe $5K for emergencies. I would never want to have debt other than a mortgage. 

    Post # 12
    10453 posts
    Sugar Beekeeper
    • Wedding: January 2011

    I agree with PPs, more information is needed.

    As long as I had a reasonable amount of money available to me, I would be ok with draining a savings account to pay off debt if the interest of the debt was higher than what I would be making.  I wouldn’t use all of my money to pay off debt though.

    Post # 13
    525 posts
    Busy bee
    • Wedding: October 2014

    I would split it up somehow, most likely I would do a 40/60 or 30/70 split with most going to debt.

    Regardless of the rates on the debt I would want to keep something in savings for an emergency rather than having to go into further debt to just live and making our situation worse. That way we’d also be able to slowly pay off the remaining balance.

    Post # 14
    4041 posts
    Honey bee

    @MissGeeBee: Honestly I wouldn’t pick any of your options. I would probably figure out 5-6 months of expenses for emergency savings and then put the rest toward the debt.

    Post # 15
    1365 posts
    Bumble bee
    • Wedding: May 2013 - Kempinski San Lawrenz, Gozo

    pay off the debt because even if the money is in savings, it’s still not your money until you’ve paid off your loans. you need to pay it off someday or another, might as well do it earliest possible to avoid paying further interests. Also, the fact that you are debt free will give you more peace of mind than any amount of savings in your account will.

    Post # 16
    918 posts
    Busy bee

    What’s the interest rate on the debt?  I myself would keep most of the money in savings, because where I live student loans are interest free.  If, however, I were paying interest on my loans then I would keep a small amount in savings and put the majority towards paying off the interest-incurring debt.

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