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Normally I'm the one giving money advice, but today I thought we'd change it up and let you (my readers) give me some money advice. In January I posted my goals for 2009. I'm happy to say that with a lot of help from my wife and parents, I've accomplished the goal of painting our house. We've also been able to save around $4,000. With this money we could accomplish another goal by paying off my wife's student loan. This is where my dilemma lies. I'm trying to decide whether it would be better to pay off my wife's loan, or to put this money towards paying off our car. Let's break down the two options.
Pay Off Wife's Student Loan - This was one of our goals for last year, but buying my wife a newer car in November put a delay on it. According to Dave Ramsey this would be the next debt to pay off because it's our smallest. Also the interest rates of the two loans, are roughly the same. However, and this is my hold up, the payment on the loan is only $50. If we only paid the $50 we'd be having to pay for it for 10 years. But it's only $50, so it's easy to fit that into the budget.
Pay on the Car - However, the car payment is $290, over the next 4 years. That's not as easy to fit into the budget. So if we paid off the car early that means an extra $290 a month saved versus $50. But we can pay off the student loan now. The car loan would take us at least the rest of the year to pay off, if not a little longer.
So which is the best choice? Here's a little more information to chew on. We'd like to start a family this year, which means my wife would like to either stay home with the baby, or just work part-time. She would be more likely to be able to do that, if we didn't have the car payment. So I guess the question is, is it better to save $50 a month right now, or $290 a month 12-16 months from now? I don't really know, what do you think?
5 comments:
This is a tough one. My outside advice is to pay off the car. When I became pregnant with our daughter we weren't sure if I would stay home or not. When she was born I KNEW I wanted to be home ... but we couldn't afford it. I was stuck working until she was 1-1/2 years old. It was miserable.
Even if your wife was to change her mind, she still might want an extended maternity leave and believe me, you will not be happy if money is what keeps her from doing that.
Good luck!
I would pay off the car. The interest rate is probably higher, and getting rid of that payment would be lifting a bit of a burden off of you!
Ladies thanks for the advice. I guess the car it is. That's the choice I was leaner towards also. Just good to confirm it.
I went to Toyota dealership to look at cars. I was inquiring about Yaris (cca 14 K sticker price). They ran my credit report which showed Beacon score of 638. I am a first time buyer, so I probably should be happy they are even willing to give me loan without co-signer. But when I asked about the interest rate, it was about 13 percent! I would end up paying almost 180 percent on that little thing. Anyways, I applied for a loan at my credit union, just waiting for Monday for reply. Is this possibly the best deal I can get? Or can I get a lower APR somewhere else? How about banks?
Banking Deals: I apologize it's taken so long for me to get back with you. How did the car buying turn out? I got the best deal through a local credit union.
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