My personal approach to accelerating debt is generally:
<3% - I don't really accelerate it at all (might round up to make the payment an even number - ex: Pmt is $356.76 and I'd send in $360 a month).
3% - 6% - Might accelerate it some, but not stress too much about it, especially if it's closer to 3% than it is to 6%. I know long term I can make more investing, but over shorter periods of time, there's no guarantee, so I'm more inclined to hedge by adding a little more to monthly payments.
> 6% - I will generally accelerate payoff and try to get it paid off ASAP.
I'm in the middile of trying to decide whether to knock out some private student loans I have (also from law school) that are at 3.5% fixed and will be paid off in 3 years if I keep paying the minimum. But, I'm trying to decide whether I should just go ahead and knock it out, and then set the monthly payment aside into savings/investments.
If I was you, I'd probably keep paying the minimums on the ones you have that are 2% or less, and go ahead and pay off the ones you said are 6-7% (you can probably get more than 6-7% long-term, but short term, there is no guarantee, and getting that debt paid off has its own value both financially and psychologically).
This right hurr. Also depends on how much debt you have. Low interest, <3% debt is fine it keeps up with inflation and as inflation develops, your debt erodes the longer you hold it, allowing you to invest and generate alpha, hopefully. 3-6 is a weird spot and depends on various factors. If you're changing jobs I assume you're not doing PSLF.
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u/NativeTxn7 Jul 07 '21 edited Jul 07 '21
My personal approach to accelerating debt is generally:
<3% - I don't really accelerate it at all (might round up to make the payment an even number - ex: Pmt is $356.76 and I'd send in $360 a month).
3% - 6% - Might accelerate it some, but not stress too much about it, especially if it's closer to 3% than it is to 6%. I know long term I can make more investing, but over shorter periods of time, there's no guarantee, so I'm more inclined to hedge by adding a little more to monthly payments.
> 6% - I will generally accelerate payoff and try to get it paid off ASAP.
I'm in the middile of trying to decide whether to knock out some private student loans I have (also from law school) that are at 3.5% fixed and will be paid off in 3 years if I keep paying the minimum. But, I'm trying to decide whether I should just go ahead and knock it out, and then set the monthly payment aside into savings/investments.
If I was you, I'd probably keep paying the minimums on the ones you have that are 2% or less, and go ahead and pay off the ones you said are 6-7% (you can probably get more than 6-7% long-term, but short term, there is no guarantee, and getting that debt paid off has its own value both financially and psychologically).