Best way to tackle those private loans

[bla_3x]

I have some "private" loans total of approx. 40K from different lenders. Rates from 8-12%
I was wondering what is the best way to tackle these?
We can pretty much live off of my spouse's income during residency.
Any advice as to either:
1. pay much more than the minimum each month.?
2. pay in several lump sums with minimums in between (like q 6months)?
3. or pay min. until we accrue the amount in question and pay in a lump sum???
4. Another, better, way that I am missing?

I also wonder if it would be better to put more into the 401 and an IRA (But I couldn't use this to pay back the loans, correct) and take longer to pay off the loans?

I feel that unlike the consolidated federals (I have the max there) the privates should be paid off ASAP, correct?
Thanks so much!

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[Jocomama]

Are these private student loans? from bank, or from personal.

I have some "private" loans total of approx. 40K from different lenders. Rates from 8-12%
I was wondering what is the best way to tackle these?
We can pretty much live off of my spouse's income during residency.
Any advice as to either:
1. pay much more than the minimum each month.?
2. pay in several lump sums with minimums in between (like q 6months)?
3. or pay min. until we accrue the amount in question and pay in a lump sum???
4. Another, better, way that I am missing?

I also wonder if it would be better to put more into the 401 and an IRA (But I couldn't use this to pay back the loans, correct) and take longer to pay off the loans?

I feel that unlike the consolidated federals (I have the max there) the privates should be paid off ASAP, correct?
Thanks so much!

 

[mshheaddoc]

Yes pay off the private loans first.

I would do whatever suits you, probably make a few lump sum payments b/c you won't have alot of money to throw at these loans at first. I'd also invest in 401K and IRA (max out the IRAS!). Some lenders do private consolidation of private loans I think as well so that might be an option ...

Obviously paying them off the sooner the better but make sure you have enough money for "savings".

 

[Polypeptide]

I have some "private" loans total of approx. 40K from different lenders. Rates from 8-12%
I was wondering what is the best way to tackle these?
We can pretty much live off of my spouse's income during residency.
Any advice as to either:
1. pay much more than the minimum each month.?
2. pay in several lump sums with minimums in between (like q 6months)?
3. or pay min. until we accrue the amount in question and pay in a lump sum???
4. Another, better, way that I am missing?

I also wonder if it would be better to put more into the 401 and an IRA (But I couldn't use this to pay back the loans, correct) and take longer to pay off the loans?

I feel that unlike the consolidated federals (I have the max there) the privates should be paid off ASAP, correct?
Thanks so much!

#3 doesn't work at all because while you are saving up money to throw on your loans they are accruing more and more and more interest since you are not substancially decreasing the principal. You are basically losing money this way. Do not do this!!

#2 seems weird because it is so inconsistant. I think you would be much more likely to succeed if you had a monthly plan. Where would the money come from for your biannual "lump" payments?

You are almost there with #1. The best way to get out of debt is this nifty little idea called the debt snowball. Put your debts, loans in this case, in order of smallest to largest. Pay minimum payments on all except the smallest. Look at your buget and determine how much you can put towards this one loan every month (the more the merrier). When that loan is payed off "roll" what you have been paying on that loan to the next loan and add it do the minimum payment you have already been making. Continue in the fashion and your "snowball" keeps rolling and growing and you are accustomed to living without that chunk of money that is going towards your debt payments.

Good luck! I'm glad you are considering paying off these loans and getting free from that debt. You will also be "saving money" by not accruing the interest that would add up if you made only minimum payments forever...

 

[Jocomama]

It actually depends on the type of loans. IF these are student loans and tax law allows you to deduct the interest, then it's a different story.
In terms of being unsecured, and I assume these are installment loans where you have a set monthly payment (like an auto loan), then pay off the following:
Whichever is your highest interest rate and principal - basically, which loan has the highest $ amount of interest? Pay that one down first.
Not sure what business core supports the snowball. Sounds interesting.

#3 doesn't work at all because while you are saving up money to throw on your loans they are accruing more and more and more interest since you are not substancially decreasing the principal. You are basically losing money this way. Do not do this!!

#2 seems weird because it is so inconsistant. I think you would be much more likely to succeed if you had a monthly plan. Where would the money come from for your biannual "lump" payments?

You are almost there with #1. The best way to get out of debt is this nifty little idea called the debt snowball. Put your debts, loans in this case, in order of smallest to largest. Pay minimum payments on all except the smallest. Look at your buget and determine how much you can put towards this one loan every month (the more the merrier). When that loan is payed off "roll" what you have been paying on that loan to the next loan and add it do the minimum payment you have already been making. Continue in the fashion and your "snowball" keeps rolling and growing and you are accustomed to living without that chunk of money that is going towards your debt payments.

Good luck! I'm glad you are considering paying off these loans and getting free from that debt. You will also be "saving money" by not accruing the interest that would add up if you made only minimum payments forever...

 

[The White Coat Investor]

8-12%! That's insane. I have credit cards with better rates. Send them every spare dollar you can get your hands on ASAP and pay those suckers off. You may try consolidating them at a lower rate as well. If you spend just 10 years paying off 40K at 12% you will have paid over $29,000 in interest plus the 40K! If you pay it off in 1 year you will have only paid $2600. Why invest in the market from which you can expect 8-10%/year on average when you have a guaranteed 8-12% investment right in front of you!