topic Re: Paying off Student loans in Rebuilding Your Credit

Paying off Student loans

simplegirl — Thu, 12 Nov 2020 23:24:25 GMT

These are my 5 student loans with the years they were open. The last one I want to pay down until I finance a car. Should I use the snowball method or pay each down all together.

$590.19 2017
$1996.67 2016
$949.74 2016
$2493.39 2014
$1463.06 2014

the amount I was going to pay monthly is $600.

Re: Paying off Student loans

Crysis — Fri, 13 Nov 2020 06:40:38 GMT

Are these federal or private? What are the relevant interest rates?

Re: Paying off Student loans

Shooting-For-800 — Fri, 13 Nov 2020 13:02:02 GMT

I would pay $25 more than the minimum on each then put the rest towards the highest rate.

SLs don’t hurt your credit if you are not late.

Re: Paying off Student loans

simplegirl — Fri, 13 Nov 2020 13:35:38 GMT

They are all federal and each one has a 90 & 120 day lates. The interest rate is the same for all of them. Before COVID the rate was 4. something I can't really remember.

Re: Paying off Student loans

Crysis — Fri, 13 Nov 2020 14:43:04 GMT

I would snowball to get rid of the lower two, then re-evaluate what you want to do with what remains in January

Re: Paying off Student loans

simplegirl — Fri, 13 Nov 2020 15:35:31 GMT

Okay. Thank you both for your advice.

Re: Paying off Student loans

Crysis — Fri, 13 Nov 2020 19:58:16 GMT

@Shooting-For-800 wrote:
I would pay $25 more than the minimum on each then put the rest towards the highest rate.

SLs don’t hurt your credit if you are not late.

While that is true, they do account for debt to income ratio, unless I'm mistaken, and therefore having smaller or no payments may change options for the car op posted about or for a home purchase.

Re: Paying off Student loans

simplegirl — Fri, 13 Nov 2020 20:03:44 GMT

Yes it is part of the reason my auto score is low and my equifax score. And it is apart of my debt ratio which includes my credit card and 2 collections.

Re: Paying off Student loans

Anonymous — Fri, 13 Nov 2020 21:24:27 GMT

@simplegirl wrote:
Yes it is part of the reason my auto score is low and my equifax score. And it is apart of my debt ratio which includes my credit card and 2 collections.

I would worry more about CC debt and the CAs than the SLs if score related

Paying off the student loans and having the accounts closed does not get rid of the lates.

Who are the CAs with? Perhaps they PFD?

If the payments on the SLs are causing high DTI, than that would be a good reason to pay them off.

Re: Paying off Student loans

simplegirl — Fri, 13 Nov 2020 22:37:04 GMT

My collections are going to be paid this month and next month and they remove without asking for PFD. My student loan is causing me to have high debt because I have 7500 in student loans. I know the lates are staying its just the fact they are causing me to have high debt. My credit card just reports a balance so I don't get dinged.

Re: Paying off Student loans

Anonymous — Sat, 14 Nov 2020 00:11:26 GMT

@simplegirl wrote:
My collections are going to be paid this month and next month and they remove without asking for PFD. My student loan is causing me to have high debt because I have 7500 in student loans. I know the lates are staying its just the fact they are causing me to have high debt. My credit card just reports a balance so I don't get dinged.

Have you paid your SLs down a signifcant amount from their original principle?

They are generally not terribly high payments, because the standard repayment is over 10 years (correct me if I am wrong, but that is how my many Fed Loans work), unless you are at the tail end of large loans.

If you are at the tail end and have large payments because of large SLs, then it may be a good idea to pay them off since they likely will be soon, anyway, to lower your DTI.

Were you specifically told by a lender that your DTI is too high? Have you looked into IBR plans to lower the payments?

Re: Paying off Student loans

simplegirl — Sat, 14 Nov 2020 00:59:54 GMT

I have not paid them down. I've only paid the minimum which went to interest mostly. And yes I was told my debt to income ratio is high. The payments are not high they are 81$ monthly.

Re: Paying off Student loans

Crysis — Sat, 14 Nov 2020 05:29:52 GMT

When were you told this, and what changes have you made since. $81 seems odd to say you have high DTI ratio.

Re: Paying off Student loans

simplegirl — Sat, 14 Nov 2020 14:56:15 GMT

Not debt to income Sorry. A lot of outstanding debt and the interest on my student loans made them look like I'm over on the original loan balance. I was told this last week which is why I posted to see how I should tackle them.

Re: Paying off Student loans

Anonymous — Sat, 14 Nov 2020 20:24:05 GMT

@simplegirl wrote:
Not debt to income Sorry. A lot of outstanding debt and the interest on my student loans made them look like I'm over on the original loan balance. I was told this last week which is why I posted to see how I should tackle them.

It actually is not uncommon to have over 100% of the original loan amount on SLs and should not affect your scores drastically, nor deny you financing unless your DTI is really high because of them. And $81/mo should definitely not crush your DTI when getting an auto loan, unless the auto you're looking at is more than you can afford.

I would think that just because your SLs have not gone down that should not hold you back from getting a car loan. I would still primarily focus on CC debt and CAs.

Some creditors will give any reason to just deny you when your scores are borderline or too low. If your scores improve, perhaps your chances to be approved will also.

Have you considered looking at other banks to try financing with? I would wait until you are ready (CAs paid/removed and CC util lowered if too high) to start apping around to save you some HPs.

good luck!

Re: Paying off Student loans

simplegirl — Sat, 14 Nov 2020 20:34:18 GMT

Thanks and I'm not trying to apply right now because I want to fix my scores first. Because I want them to be at 690 before I apply. Also I'm trying to get 1 more credit card which is why I'm trying to pay off these student loans. I don't have any cc debt because I've already paid them all. All I have is the charge off accounts left over with the negative history.

Re: Paying off Student loans

Anonymous — Sat, 14 Nov 2020 20:52:45 GMT

@simplegirl wrote:
Thanks and I'm not trying to apply right now because I want to fix my scores first. Because I want them to be at 690 before I apply. Also I'm trying to get 1 more credit card which is why I'm trying to pay off these student loans. I don't have any cc debt because I've already paid them all. All I have is the charge off accounts left over with the negative history.

How recent are the COs? Are they paid?

Have you tried to GW them off your CRs?

Honestly, if you do not have actuve credit aside from the SLs, it is not the SLs holding you down and paying them off will not jet you major gains, as I have found installment loans do not do much for credit other than satisfying credit mix. I am not saying they are worthless, but paying them off will not be your biggest help.

Have you looked into secured cards? Discover? Capital One? Both have preapproval websites to see if you qualify for anything before you actually apply.

There are a lot of good secured products out there that can graduate to unsecured cards. BoA (their prequalify page is more marketing than actual preapproval, so do not count on it, why I did not suggest prequalifying with them), TD Bank, and others. Open sky also is an option with no HP.

I would strongly discourage Credit One and First Premier or cards like those.

Re: Paying off Student loans

simplegirl — Sat, 14 Nov 2020 20:59:39 GMT

I have 1 credit card from Citibank & just got approved for capital one platinum card. And all the charge offs are paid plus I have sent out goodwill letters to the creditors started in October. Discover is one of my charge off accounts and I have been trying there pre approval soft pull so I can get a secured card by them. So I don't want to get a third card unless it is Discover. I know its not a big help but I just want to have 1 installment loan and I've had them for so long that are more now than originally.

Re: Paying off Student loans

Crysis — Sat, 14 Nov 2020 21:10:21 GMT

Interest will do that. Are they all from the same company?

I would probably tackle the smaller two, considering them more "hassle" than anything, but would probably pay as agreed or pay a bit extra a month on the remaining assuming they are one payment all together.

Re: Paying off Student loans

Harmony12 — Sun, 15 Nov 2020 20:11:38 GMT

@simplegirl I recommend paying the Student loans off using the snowball method. I have been doing this and it's a great feeling seeing a loan PIF. Right now, with federal loans being 0% interest you can apply all of your payment towards the principle of an individual loan (if no outstanding interest). You do not have very much SL debt so you'll be done paying in no time.