My goal was to pay off my Student Loan... Sould I?

[billy]

First, sorry if I am not posting this in the correct category.

But, I have 20,000 dollars in my savings but 17,000 in student loans.

Need a little advice, do you guys think it would be best to continue to make the 160 dollar a month payments while investing my 20,000 into a business.

Or should I pay it off and be left with 3000? My financial situation is not terrible at all, I have a !> JOB <! yes, I hate it. And that student loan and my cell phone bill are the only bills I have.

I have some really great business ideas as well but I just would like to know what you guys think my best choice would be.

 

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[John C.]

Billy,

Have you ever heard the expression, "cash is king"? That should give you a hint about what you should do.

What is your interest rate on the loan? I feel certain that it is a lot less than any other unsecured loan (credit card) debt you could get.

If you start a business, generally you will have a tough time getting financing for it. Once you pay off the loan, your cash is gone. You cannot re-borrow that money unsecured. If you strike it big in the near future, you can always pay off the student loan.

I think you should always preserve your cash until you are on solid footing. Cash is difficult to accumulate but can fly out the door very quickly unless you really guard it closely.

My advice would be to be extremely careful about how you use your nest egg. Having some cash reserves gives you a much greater sense of security. If you pay off the student loan, it would be very easy to get preoccupied with worrying about money.

 

[Operation_OPM]

Relax, this isn't the Suze Orman show. You can start 20 businesses that net you $160 a month with the time it'll take you to pay that loan off via a job.

 

[andviv]

If I were in your shoes, I would keep making my monthly payments and, in the meantime, start putting together a business. For a business to start making excess cash, it usually takes time, and I've always end up seeing that you need more cash than expected to getting going. But again, that is just my opinion. Good luck.

 

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[Darkside]

Is this a fixed rate loan or adjustable? That makes a huge difference. I would probably pay it off completely but that's only because I've heard horror stories of people who are still paying their student loans well into their 40s and 50s. Until you pay it off, you're like an indentured servant to the loan company, and if you get sick and can't work for a while you won't be able to pay off your loans. Best to get them out of the way now. Also, if you don't have many monthly expenses as you say, then you should be able to use your monthly paycheck to fund your fastlane business.

 

[Runum]

It depends on what you know and what you think you know. If you think you can take that $20,000 and make it give you back more than $160/ month then you better pay the loan off. If you know you can get more than $160/month return on a $20,000 investment then you need to invest the money.

I know that I could get that money to make me at least $600/month within 3 months. Others may be able to do better than that.

 

[Anybid]

I know that I could get that money to make me at least $600/month within 3 months.

No offense, Runum, but to tease us like this is almost cruel

I would sure love to know a bit more about how you get a 600 USD return on 20,000 USD in only three months (and I guess I'm not the only one).

Just a guess: does it have to do with real estate....?

 

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[Runum]

This is only one method but it does work. :smxB:

https://www.thefastlaneforum.com/re...ancing-owning-many-properties.html#post165365

 

[Anybid]

Thank you very much for the link, Runum (I knew you could not be that cruel)

From my (very little) experience that I have with real estate, the biggest risk in your plan is the tenants. When I was looking for good tenants for my property (back in the mid-90s in South Florida) I could simply not find them.

Of course I don't know anything about the market in Texas right now, but I could imagine that it is not that easy to find a good tenant who pays 800 USD rent to live in a 30,000 USD MH, just because almost everybody could buy it directly (9,000 USD down should not be too hard to manage). And of course nobody wants any of those nightmare tenants: Landlords' tales of nightmare tenants - MSN Real Estate

But I might be completely wrong. In any case I find it terrific that you give a real world example with all the details, thanks again!!!

 

[Runum]

Thank you very much for the link, Runum (I knew you could not be that cruel)

From my (very little) experience that I have with real estate, the biggest risk in your plan is the tenants. When I was looking for good tenants for my property (back in the mid-90s in South Florida) I could simply not find them.

Of course I don't know anything about the market in Texas right now, but I could imagine that it is not that easy to find a good tenant who pays 800 USD rent to live in a 30,000 USD MH, just because almost everybody could buy it directly (9,000 USD down should not be too hard to manage). And of course nobody wants any of those nightmare tenants: Landlords' tales of nightmare tenants - MSN Real Estate

But I might be completely wrong. In any case I find it terrific that you give a real world example with all the details, thanks again!!!

You're welcome but this is why a lot of deals aren't posted. Sure there is always a risk to every investment. Tenants(residents) can be a risk. But in order to get bigger you have to grow bigger than your problems.

This deal is a HUD deal. Most people do not dig down to find this kind of deal. The deal would retail around$ 60,000. Even at $50,000 you still make money. Yes it will rent in my area. I do have several of these now.

You gotta weigh risk/reward and look at more than the negative.

Good luck.

 

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[gofalls]

If you had ZERO debt and 3k in the bank would you go out and borrow 17k?

If you can make the 36% CoC return that Runum makes then it might make sense to borrow the 17k but why stop their. Why not borrow 50k or 100k and make 36%. Borrow 200k and make 70k a year and then you no longer need the j.o.b.

 

[Ska2free]

You might want to check out this calculator:
Student Loan Calculator

Try a few different numbers, there may be a sweet spot where you are are saving a good chunk in future interest but you're still left with some free cash to fund your start up. It doesn't have to be all or nothing...

There's value both in eliminating long term student loans and in having liquid cash, but it depends on you...will the cash burn a hole in your pocket, or can you earn returns on it like Runum describes?