Student Loan vs Credit Card debt – paying off?
Thursday, April 22nd, 2010 at
1:10 pm
With my tax refund, I will have enough money to pay off my credit card or I can apply the refund to my private student loan and pay about 35% of it.
Interest Rate- Student loan = 18.65%, Credit Card = 14.5%
My student loan will not enter repayment until the summer (if this matters). I would feel better paying down my student loan so the minimum payment is lower but paying off the card sounds nice as well.
Can you give me advice?
Tagged with: card • Credit • Debt • Loan • paying • Student
Filed under: Credit Cards
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Pay off the credit card and stop using it.
Student loan rate is extremely high, try refinancing. Even a personal loan would be about 10%
I would pay off the credit card. That way, you only have a monthly payment for the loan instead of one for the loan and one for the card.
I would pay off your credit card first as it will begin accruing interest sooner and besides that, the threat of retaliatory interest rate hikes is higher on your credit card.
Student loans cannot be discharged in bankruptcy and will haunt you forever (literally beyond the grave) if you do not pay it off. Worse, your interest rate on that student loan is exhorbitant. Pay off that student just as fast as you possibly can and get it paid off urgently! Just make minimum payments on the credit card for a few months until the student loan is paid in full, then pay off the credit card in full.
Don’t spend on anything until you get these paid in full. This is not a time to have any debt whatsoever hanging over your head. The economy is an absolute stinker and getting worse.
Your student loan rate is 18.65?!!! Ouch. I would go for the credit card first and keep the balance in an emergency fund. Credit Card rates fluctuate well into the 20s and could be much worse. I would then look into reconsolidating your student loans into a much smaller rate.
What type of student loan do you have? These are usually government insured and therefore have a low rate. You need to find another lender for the student loan. This is an extremely high rate. Shop around for other lenders. In the mean time you need to wipe out your credit card debt. Lenders view this as bad debt and it seriously lowers your credit score. Cut up the card (don’t close the account) and never use it again.
Use your improved score to apply for a student loan with a lower rate. Use the money you were paying to the credit card towards reducing the principle on your student loan.
Your student loan if guaranteed by the government would only be around 5 – 7 per cent interest. You should consolidate all your student loans through Dept of Ed. You must have borrowed direct from a bank to have that high an interest rate. Pay off credit card because the way they figure interest adds up to more.
That depends on you–
Do you trust yourself to not charge back up the credit card? Be honest with yourself.
If you are a habitual charger, then pay down the student loan. Not judging anyone here–just talking from personal experience, i’m not good with credit cards.
Once the student loan is paid, it’s paid, you can’t get that money back. But by paying down the credit card, you could go right back and re-charge up the balance you just paid off. Then you are right back into the situation you are now, only without the tax refund.
If you have already gotten rid of the card, and definately will not use it again, then it more depends on the balance. Just because the student loan has a higher rate, dosen’t mean you are paying more interest per month, if it has a lower balance than the card, you might not be. Pay down which ever one you are paying more interest per month on.
And, yes the payment could be important here, too. Remember that as you pay down the credit card, the minimum payments will get lesser. Student loan payments tend to stay the same over the life of the loan. I’m not saying you should ever pay the minimum on a credit card, but sometimes emergencies happen, and it’s all you can do.
If you are worried about an emergency fund, don’t pay down the credit card for that. Put all or part of the money into some kind of interest bearing savings account that you can only access by going down to the bank–the bank can help you with that. That makes it a lot harder to spend it on luxury items, yet it’s still accessible in a major emergency. Credit limit on a credit card is not emergency savings. Yes, it’s good to have in case of an emergency, but savings in case of an emergency is much better to have.
First, get an emergency fund of at least $1,000. Next, see if you can refinance the student loan to a lower rate.
There are two schools of thought on how to pay off debt: 1) the highest interest 2) the lowest balance. Paying the highest interest debts will save money in the long run. Paying the lowest balance account will reduce the number of accounts owed and free up those payments for other debts sooner.
Also consider the impact to your credit score. A student loan is an installment loan, which is a “higher” class of credit than a revolving credit card account. For a higher score, keep the cc balance below 30% of the available credit. You may want to pay down the card balance to 30% and put the rest toward the student loan.
You are suggested to think about consolidate student loans. Hope it help you to reap the benefit.
Here is a useful link. http://www.studentloansmatter.com/consolidate-student-loans-reap-benefits
You can apply for a free student credit card, you can establishing credit by filling out a short online application. You can get a small interest rate student credit card or even 0 apr with a prepaid card. Good luck.