Student loans: paying off loans with different interest rates
Student loans can come with different interest rates. Is it better to pay off students loans that you owe the most on, or that have the highest rate first? Look to question No. 6 of the reader mailbag.
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Ok so now to my question! (well it’s in there at the end!) I drive 500 miles a week for work as a consultant dietitian in nursing homes. I am paid ~$1000 a month by my company for mileage expenses which I don’t count as my income, I pay myself back for gas and oil changes and put the rest in savings. My car was a gift from my boyfriend’s parents and is a 1996 toyota camry with ~175K miles. I’ve owned the car for about three years and it is fairly dependable. I have recently replaced the alternator and the timing belt, both costly items. I’ve asked one car rental chain about renting a car for the month and was given an estimate of ~$1300 per month (rental plus optional liability insurance). I currently only have liability insurance on my own vehicle, not collision.
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The Simple Dollar is a blog for those of us who need both cents and sense: people fighting debt and bad spending habits while building a financially secure future and still affording a latte or two. Our busy lives are crazy enough without having to compare five hundred mutual funds – we just want simple ways to manage our finances and save a little money.
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What I want to know about the car situation is when I buy a new (used) car, what would be my best option? Should I look for something low-cost that’s dependable that may only last a few years? I just worry about buying a relatively newer car at a good price just to put so many miles on it! Should I shop around more at the rental places and try to find a place that will get close to my reimbursement level?
- Kathy
I would buy the best car you can with the cash you have on hand. Do not take out any debt for the car. Use the balance of the “emergency” account minus $1,000 (meaning you should leave behind a $1,000 emergency fund).
Focus on reliability with that purchase. Look for the car that will last the longest at your price point. It’s going to be used and it’s going to be older, but the point is that it gets you reliably from point A to point B for the next few years.
Yes, you’ll probably drive it into the ground. That’s fine. Remember that driving a car is the point of owning a car. If you didn’t have a need to get from point A to point B, you wouldn’t own a car.
Q8: Partner with terrible credit
I am 53 years old and divorced. Recently my ex-husband and I got back together. He owns the house that we built together and I bought a new house after our divorce. Currently, we are living in my house as it is smaller and more practical for empty nesters like ourselves. My husband has put our old home on the market but there has been little interest in it so far. His salary barely covers the mortgage and utilities so he can’t really contribute to our current living expenses much. He is wondering how long he should struggle to make the mortgage payments before giving it up to foreclosure or a short sale. I feel if we have no offers before winter, we should give it back to the bank. My question is this, I am in good financial shape with savings and no debt except my house. He may have a foreclosure and has 10′s of thousands (he won’t give me a number) of credit card debt. He wants to get remarried but I am afraid of the financial consequences to me. My credit score is 814 and I would like to keep it that way. I also don’t want to be responsible for any of his debt that he accumulated during our divorce period. Any advice?
- Marjorie
As long as your name doesn’t wind up on any of the debt, you should be okay.
The problem comes with things like insurance (if you get insurance together, your rates will be higher because of his likely poor credit score) and future loans (if you get a loan together, his credit score will raise the interest rate). Any financial arrangement you enter into with him will likely find his credit being a problem.
Most likely, your credit score won’t be affected, but you’ll still feel some of the financial consequences of his score unless you keep your finances very separated.
Q9: Housing choices in expensive area
After 3 years of unemployment, my husband has received a job offer and plans on taking it. Our combined income is close to $200K but we live in a very expensive city. We have a condo that we rent (rent doesn’t cover the entire mortgage and HOA dues – about $150 short) and a house that we live in. We are currently underwater in both of them due to the turn in the real estate market.
We have about $20K in student loans (at 3% interest), $6K on a car loan, $4000 in credit card debt and the mortgages on both our properties (currently paying interest only on all 4 – 1st and 2nd mortgages). I’m on track with my 401K (we’re both 38 years old) but my husband falls behind due to not being employed for a couple years. We have about $10K each in IRA and plan on adding $5K a year to each of these and about $10K in savings.
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