Please help!!!

thanks!

I appreciate your opinion, and this blog is set up exactly for that. I don’t claim to have all the answers or think that all of my opinions about money are the correct opinion. However, I have to disagree with you about this one.

I would always suggest that someone pay off their debts as quickly as they can. The reason for this is the elevated factor of risk that is placed into our lives when we have debt payments. If you are satisfied with paying $200 bucks a month for the next 10 years, a lot can happen in 10 years. What if you lose your job while your wife is pregnant? What if a medical emergency occurs that requires some significant out-of-pocket expenses. Insurance helps, but these situations can cause some extraordinary financial burdens. Now, you have to put those student loans on hold to pay for other things, and your credit is destroyed and creditors are calling you every day. If you had paid off those debts early, you wouldn’t have to worry about them when the worst happens. I’m not trying to be pessimistic, but it is naive to think that financial hardship won’t happen to you or me.

When we keep debt lingering around, it increases the risk in our financial lives.

Second, why would you ever borrow against your own money? What you just described to me is no different than saying you have $10,000 in the bank. You want to start a small business with $10,000, but instead, you take out a $10,000 loan at the bank at 8% interest, because you are making 10% on the $10,000 in your bank. Is the 2% net gain really worth it if the worst happens? The worst would be that you take the $10k in the bank and pay for a new roof on your house, then your small business fails due to a shift in market demand. Now, you owe $10k, but the $10k in your bank account is gone. If you had paid the $10k for the business up front, you could have patched the roof to hold you over for another year or so, and stayed out of debt. Does that make sense?

It’s your money, and you can play the interest game, but know that it increases the risk in your life and risk is a calculable variable that decreases the net gain of an investment.

I really enjoy reading your blog and you have some great advice. Take care.

For people in our situation, I do not agree that the loan should be paid off immediately. I earn 4.5% interest on they money that I would have used to pay off the loan from ING, and I get a tax deduction on some of the interest I pay on my loan. In addition, prompt payment of a loan every month shows potential creditors that I am a reliable risk. I still have 12 years left in my loan and I am planning on letting Sallie Mae continue to automatically withdraw a few hundred each month.

Just a thought for those of us lucky enough to lock in a lower rate.