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Author: Leviathan Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308691  
Subject: Re: intro & what to do with extra $$ Date: 8/21/2003 2:50 PM
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Here's my situation. I currently have $2800 in CC debt at 4.9% (balance transfer rate) and $7000 in a student/career training loan at ~8%. On the loan I'm 2 years into a 15 year term. I put 15% into my 401(k) (not matched) but due to a recent bout of short-term unemployment, have no savings or efund to speak of.

However:
I am planning on selling some stock next week that will result in around $2000. Also I am expecting a reimbursement for unemployment benefits of around $2000.

My current plan is this:
Put the $2k from unemployment reimbursement directly into E-fund
Put $1000 from stock sale toward credit card
Put $1000 from stock sale toward student loan
Find a credit card with a low fixed balance transfer rate and transfer the rest of the student loan to the card. With a $100/month payment at 5% interest, I can pay off the loan in about 7 years instead of 13. I have been making payments of $100/month on the credit card.

What do you all think? Any other suggestions I haven't thought of? If I raise my credit limit on my current card (shouldn't be a problem) I can transfer the student loan to that card. I think the interest rate for balance transfers is 4.75% right now. Unfortunately my job situation is precarious so I want to make sure I have at least a bit of an efund available.


Assuming that you're working again then yes, I would pay down debt. However, I would instead take $1200 for the e-fund and pay off the credit card today. That's one debt gone.

After that, your math doesn't seem to work. In transferring the loan from 8% to a 5% credit card you're saving 3% in interest a year. 3% of $7000 is $210/year in interest (roughly) or $17.50 a month that you'll be saving. Now, $17.50 a month is certainly something but I don't think it's the difference in six years on a loan. How about getting a second job and paying it off in about seven months instead of seven years?

Leviathan
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