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Started By
Message
Refinacing student loan and extending term
Posted on 2/26/15 at 1:11 pm
Posted on 2/26/15 at 1:11 pm
I have finally decided that it is time to refinance my student loans. I anticipated paying them off in 10 years, I'm on my 5th year right now, but have decided that is foolish. Please give me advice on whether I am making a smarter move cash flow wise.
Currently pay 6.8% with a little over 5 years left.
Will pay 5.125% over 15 years. (so an additional 10 years)
Will free up approximately $450-525 in cash each month. I plan on investing $400 a month continuously in an account that will return me 8% in total investment in dividends over the course of a year. My plan is to build up the monthly return in dividends to pay the full amount of my loan and then never worry about paying it again. The extra $50-125 will go to savings and rainy day fund. Does this sound like a sound plan?
Currently pay 6.8% with a little over 5 years left.
Will pay 5.125% over 15 years. (so an additional 10 years)
Will free up approximately $450-525 in cash each month. I plan on investing $400 a month continuously in an account that will return me 8% in total investment in dividends over the course of a year. My plan is to build up the monthly return in dividends to pay the full amount of my loan and then never worry about paying it again. The extra $50-125 will go to savings and rainy day fund. Does this sound like a sound plan?
2
Posted on 2/26/15 at 1:17 pm to Dr. Grey
No. How do you plan to guarantee 8% every year? Just stay the course and pay extra if possible to knock them out.
Posted on 2/26/15 at 1:19 pm to TigerDeBaiter
I wouldn't do it. If you have just 5 years left, why not just suck it up, get more aggressive about paying down the principal, and knock 'em back in 3 years?
Posted on 2/26/15 at 1:58 pm to Dr. Grey
quote:
return me 8% in total investment in dividends over the course of a
Where do I sign up...
If you are deciding to invest in stocks/funds that Yield over 8% then you are more than likely going towards a world of pain.
Posted on 2/26/15 at 2:01 pm to UltimaParadox
What if some of it is return of capital?
This post was edited on 2/26/15 at 2:02 pm
Posted on 2/26/15 at 2:22 pm to Dr. Grey
Still stupid..... Im locked in at 6.8% and I've paid off 30 grand of principal in 2 years.... Im still investing in 401k, paying off car and Truck loans, mortgage etc.....
Not worth it to carry more debt for longer Imo.
Not worth it to carry more debt for longer Imo.
This post was edited on 2/26/15 at 2:22 pm
Posted on 2/26/15 at 2:48 pm to Dr. Grey
quote:
What if some of it is return of capital?
Why would you want to invest in a depreciating asset? You may as well just buy a fricking annuity.
Posted on 2/26/15 at 3:14 pm to VABuckeye
Ok. So, the stock is a closed end fund that pays a pretty good "dividend." I understand that some of it is return of capital. How much is ROC isn't determined till the end of the year if I am not mistaken. Anyway, this will free up some cash flow for me and I am of the belief that this is a solid investment.
Posted on 2/26/15 at 3:18 pm to Dr. Grey
No offense man but if you think any of this is a good idea then you need to have someone handle your finances for you.
Posted on 2/26/15 at 3:27 pm to iAmBatman
So because I am trying to free up some money each month this becomes a bad idea? Nobody is explaining exactly why it is a bad idea.
Posted on 2/26/15 at 3:35 pm to Dr. Grey
What's the principle amount on the loan, the rate, and the monthly payment? Need the same numbers for the new loan and I can show you why its a bad idea.
ETA: I get that your trying to pay less cash each month but I'd be willing to bet you're gonna be paying a whole lot more in the long term. Just a guess without the actual numbers.
ETA: I get that your trying to pay less cash each month but I'd be willing to bet you're gonna be paying a whole lot more in the long term. Just a guess without the actual numbers.
This post was edited on 2/26/15 at 3:37 pm
Posted on 2/26/15 at 3:40 pm to Dr. Grey
Why is it a bad idea?
--you will be paying more for the borrowed money, despite the lowered interest rate, simply because you have extended the loan period. Go run the numbers on your present loan and the refinanced amount....look at how much in additional funds you'll be spending on interest to extend the payment period.
--rather than retire the debt quickly, you will have it hanging over your head for a decade more than the original payment schedule. not good for peace of mind...and it extends the debt risk far enough into the future to make uncertainty a factor. what if you hate your job and quit? get laid off? become disabled? for the next 15 years, you have that loan obligation hanging around your neck.
You don't mention why you're trying to "free up" money each month. The better alternative to refinancing debt and extending the repayment period is to EARN more each month. Get a side gig...surely the good Dr has some marketable skills.
Also, be damned sure you're not eligible for loan forgiveness or repayment before you do anything with a refinancing plan.
--you will be paying more for the borrowed money, despite the lowered interest rate, simply because you have extended the loan period. Go run the numbers on your present loan and the refinanced amount....look at how much in additional funds you'll be spending on interest to extend the payment period.
--rather than retire the debt quickly, you will have it hanging over your head for a decade more than the original payment schedule. not good for peace of mind...and it extends the debt risk far enough into the future to make uncertainty a factor. what if you hate your job and quit? get laid off? become disabled? for the next 15 years, you have that loan obligation hanging around your neck.
You don't mention why you're trying to "free up" money each month. The better alternative to refinancing debt and extending the repayment period is to EARN more each month. Get a side gig...surely the good Dr has some marketable skills.
Also, be damned sure you're not eligible for loan forgiveness or repayment before you do anything with a refinancing plan.
Posted on 2/26/15 at 3:51 pm to L S Usetheforce
quote:
Still stupid..... Im locked in at 6.8% and I've paid off 30 grand of principal in 2 years.... Im still investing in 401k, paying off car and Truck loans, mortgage etc.....
That's impressive. You must make bank
Posted on 2/26/15 at 4:36 pm to iAmBatman
I'll be paying less than $9,000 extra in interest over the course of the 15 years and opposed to the 5 years. I think to have more money in the short term is a better investment.
Posted on 2/26/15 at 5:18 pm to Dr. Grey
I'm trying to be nice about this but there's no way you're paying less by extending the length of your loan by 10 years. Just post the numbers I requested and I can show you.
This post was edited on 2/26/15 at 5:19 pm
Posted on 2/26/15 at 10:41 pm to Dr. Grey
I agree with hungryone. If you really need extra cash each month, then do it by increasing your income, not by extending a loan. You're halfway there.
Forgive me for being ignorant, cause I never took a student loan, but if student loans are amortized then you've already paid a majority of your interest, and your remaining payments are actually lower interest than you think. Meaning that if you refinance, you'd be on the front end of a new amortization.
Don't lose your momentum. Keep rolling.
Forgive me for being ignorant, cause I never took a student loan, but if student loans are amortized then you've already paid a majority of your interest, and your remaining payments are actually lower interest than you think. Meaning that if you refinance, you'd be on the front end of a new amortization.
Don't lose your momentum. Keep rolling.
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