Submitted by [deleted] t3_127t2ao in personalfinance
[deleted]
Comments
satinkzo t1_jefo485 wrote
Assuming you are putting other money into higher yielding assets then no I wouldn't pay more other than to just be done with it.
Take what extra you would pay in hysa for now or something similar that will outperform currently. Then when rates do drop make lump sum payments to these.
Of course the argument could be made to pay the mortgage off sooner than later regardless. My mortgage is 2.5% but I still pay extra per month
trueworkingclass t1_jefw2z3 wrote
how is it ok for you to pay extra 575 ( interest is 2.5%, not 0 %) for your debt, 9100 for interest on your mortgage; pay the minimum for your mortgage and get the debt paid off then put extra toward your mortgage
Cruian t1_jeg78e5 wrote
>how is it ok for you to pay extra 575 ( interest is 2.5%, not 0 %) for your debt, 9100 for interest on your mortgage
They can get a better return, risk free, by tossing that money into one of many HYSAs and only paying minimums on those debts.
Edit: Typo
JohnQK t1_jefsar3 wrote
You should always pay as much as you are able without putting yourself at risk. This reduces the total amount paid and, eventually, removes the payment entirely sooner, which increases savings.
Cruian t1_jeg6y2e wrote
>removes the payment entirely sooner, which increases savings.
Their savings would increase faster by using many HYSAs instead of paying at least some of these debts.
torunmetsfan t1_jeggvmn wrote
The best savings account these days is probably 4% tops, so the amount saved between putting money there vs paying off the student loans is like $20 a month. I think the peace of mind of not having that debt over your head is worth $20 a month to most people, but it’s not wrong either way. There’s also the reality that most people will SAY they’re going to pay the minimum and invest the rest, but in reality they pay the minimum and spend the rest. Paying down debt is irrevocable forced savings.
Cruian t1_jegnknp wrote
>I think the peace of mind of not having that debt over your head is worth $20 a month to most people, but it’s not wrong either way
It becomes a mathematical best vs possibly emotional best.
>There’s also the reality that most people will SAY they’re going to pay the minimum and invest the rest, but in reality they pay the minimum and spend the rest. Paying down debt is irrevocable forced savings.
Yes, self control is required, (edit to finish accidental early posting follows) but that applies elsewhere too.
torunmetsfan t1_jegtyz5 wrote
Sure but there’s a mathematical/dollar value associated with having a better emotional state. And it’s such a small amount of money, it’s just not worth any effort/stress/time to arbitrage a $20,000 loan at 3% against a hysc at 4%.
Cruian t1_jegudlj wrote
It depends on the person. I absolutely would put in the effort for example. Basically no extra stress, 5 minutes a month tops, can be done alongside my other banking already.
JohnQK t1_jeg7zmo wrote
This is not correct. In addition, watch out for keywords often used by scammers, such as "HYSA."
Cruian t1_jeg8b1m wrote
>watch out for keywords often used by scammers, such as "HYSA."
It's a relative term. There are options with higher interest rates than the debts OP has.
>This is not correct
How so? If rates drop again, below the debt rate, then it would make sense to pay the debt.
Edit: Typo
alexm2816 t1_jefnmud wrote
I wouldn't fault logic that prioritized investment over paying loans at an APR less than most HYSAs. I will let go of my 3.125% mortgage on my death bed.