- September 22, 2023
- Posted by: legaleseblogger
- Category: Related News
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During the Covid-19 pandemic, we experienced significant progress on our financial journey. One of the major contributing factors was the student loan pause, which provided immense relief. With this newfound financial flexibility, we seized the opportunity to purchase a modest home at an incredibly low interest rate. Additionally, we managed to pay off approximately $8,000 of our remaining debt, primarily in the form of credit card balances.
Looking ahead, we have set a goal to become completely debt-free, excluding our home loan, by the end of 2025. However, we are currently deliberating on the best strategy to maintain our momentum and continue our debt reduction efforts.
To provide some context, our combined annual take-home pay amounts to around $95,000. Now, in terms of my student loans, I have three possible options to consider, given that I currently owe $11,500 with an average interest rate of 5.625%:
1. The first option is to start paying my student loans on the standard repayment plan, which would require a monthly payment of $328.
2. Alternatively, I could switch to an Income-Driven Repayment (IDR) plan, reducing my monthly payment to $114.
3. Lastly, I have the option to put my student loan payments on forbearance for a year, allowing me to temporarily suspend payments and resume them next year.
Apart from my student loans, we also have additional outstanding debts to address. Specifically, we still owe $6,000 on our credit cards, with a minimum monthly payment of $180 and an interest rate of 23%. Additionally, we have a remaining balance of $14,000 on our car loan, requiring a monthly payment of $262 at a 4% interest rate.
Considering our financial circumstances, if we were to opt for an IDR plan, we estimatethat we could successfully eliminate the remaining credit card debt and pay off the car loan by the end of 2024. However, I must confess that I harbor concerns about the potential increase in my student loan balance if I were to choose the IDR or forbearance approach.
Fortunately, there are innovative tools available to empower individuals like us in making well-informed financial decisions. One such tool is the AI Legalese Decoder, a revolutionary platform that simplifies complex legal jargon and presents it in an easily digestible format. With its assistance, we can decipher the intricate terms and conditions associated with each of our loan options, helping us gain a comprehensive understanding of the short-term and long-term implications.
By leveraging the AI Legalese Decoder, we can accurately assess the potential consequences of varying courses of action, such as the impact on our student loan balance. This insight would enable us to make an informed decision that aligns with our overarching goal of achieving financial freedom.
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How AI Legalese Decoder Can Help with the Situation
Introduction:
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Conclusion:
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****** just grabbed a
Forbearance.
Pay off the CC debt aggressively, and ASAP.
Would pay the minimum on the car loan until the CC is paid off. That 23% rate is awful.
After the CC debt is paid off, then IÔÇÖd get back on the student loans and the car loan at least at the minimum, and more if you can, paying off the student loan first given that higher interest rate vs the car loan.
The IDR plans are good if you need the breathing room but are mostly useful if youÔÇÖre aiming for loan forgiveness.
Yes, you want to do whatever possible to pay down the credit card as quickly as possible. The interest on that is killing you.
If you get on the SAVE plan, interest is waived if your required minimum payment does not satisfy the interest accrued on the debt. Use the Loan Simulator to find which IDR plan is best for you.
There’s essentially no downside to reducing minimum payment.
It gives you flexibility to prioritize higher interest debt, and you can still pay more than the minimum if/when you want.
Get on the IDR and hit the credit card hard, but on 4% car loan you are better off paying the minimum and saving up emergency fund, retirement fund, etc.
You only get a limited amount of forbearance so don’t use it if you don’t really have to, and if you build up savings you will be less likely to need it.
I will dissent.
I think you should start up paying on the standard plan.
Pay off the credit card as soon as possible.
Pay the student loans next
Then, pay off the car once the student loans and credit cards are paid off.
Why do you want to pay the car off before the student loans? The student loans would be next on a snowball since it’s a smaller amount. Plus the student loan has higher interest.
Let me start by saying good job trying to get this sorted out, you arenÔÇÖt in that bad of a spot. It certainly feels worse than it is. I also wouldnÔÇÖt worry about the car or home loan. Those are normal things even very responsible people do. DonÔÇÖt strain yourself over those. That all being said, you have made some mistakes and IMO the advice being shared so far is bad. HereÔÇÖs my thoughts:
To me buying a home in your situation before figuring this all out isnÔÇÖt progress, itÔÇÖs a huge hindrance. DonÔÇÖt put anything into forbearance or go one IDR. Pick up a night job or reduce your lifestyle to pay down the CC ASAP. Once the CC is paid off, take the money you would have been paying and make huge payments towards the student loans. Only ever go on IDR if you have no real plans of paying off the balance. IDR wonÔÇÖt even cover the interest so your balance will grow as you make payments which is nonsense. Best case is you make payments and the balance neither grows or decreases.
You may find these links helpful:
– [Student Loans](/r/personalfinance/wiki/studentloans)
– [Student Debt Relief Megathread](/r/personalfinance/comments/wxme1a/student_debt_relief_megathread/)
– [“How to handle $”](/r/personalfinance/wiki/commontopics)
– [Debt](/r/personalfinance/wiki/debt)
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