What would YOU do?

[michaelb]

I don't have an emergency fund, so don't take advice from me. I would pay off the debt and be done with it. I would rather not have to pay debts or deal with them if there was an emergency. I have been paying my student loans for 16 years and have another 13 years to payoff (so paying them off someday will be nice).

My plan, if you could call it that, is that I could easily leverage $20-30,000 off my home equity loan and credit cards, if there was an emergency, and that would put me back to paying 250 or so in payments on loans if I had them.

Now, do you really need to make a decision in the next 6 months? I would think using your tax return to pay them off would make the most sense. 6 months more of holding the cash and paying the loan isn't really going to amount to much of a difference.

[Blurb]

I faced a similar kerfuffle (I love that word :wiggle in the past with my student loans. It came down to my paying off my student loans before getting my emergency fund. That was "my comfort level" or "following my gut", and that is what won out in the verbal war in my head about the situation. I worried more about the monstrous debt (4 different student loans with the highest interest rate @ 16.5% and the lowest at 9%, from the 80's) than I did the lack of safety net. It gnawed away at me to think of paying the lender that much interest when I had money in a money market or similar safe investment at a much lower interest rate.

There are experts who would argue either side of decision, just as you are. You gotta go with the decision that you can sleep with (or live with). That was how I made up my mind.

[vision63]

I'd pay off the Student Loan. At least that would be a major life's burden over and done with. Replenish the Money Market Fund at tax time. 2 grand wouldn't save you from that much anyway. Of course if you are between jobs or something like that, don't do it.

Or you can "hook a brother up" and I can buy a Nikon D700.

[tenders]

I don't think 8-8.5% is that great of a rate to pay--but it's a pretty good rate to earn. How many other investments can you make that have a guaranteed 8% payoff? Not too many!

Well, that's the rate of return you get for paying off that loan.

I wouldn't deplete my savings to pay it off but I'd definitely be aggressive in doing so.

[stoney70005]

I had a similar, though not so urgent situation at the end of July. I owed about $3200 on my car, and could afford to write a check to pay off the balance. Making monthly payments would take until March to pay it off. But the interest rate is so low, that I would only save about $50 by paying it off early. Instead I chose to keep that cash in my checking account, and when Hurrucane Gustav came around was very happy to have cash on hand. Essentially I paid 50 bucks to have $3200 extra in my checking account.

My question to you is how much money will you save by paying off the loan early, or partially? How secure is your job and housing situation? As others have said, now might not be a good time to be out of debt but cash free.