Early SL Payment VS Car Payment

[Anonymous]

I am in a fortunate position to have my car payment paid up till 9/19 and now I am wonder wheather it more benifical to make early payments on my SLs. I own about $4500 left on my autoloan at 4.71% and have about 16k in student loans ranging from 3.7%-5%. From a financial stand point I know it will save me the most money if I pay off the sl @ 5%. 

I guess does it make sence to switch to paying on my student loans early vs my car? I would still make small payments on the car. How would that effect my credit score, do banks consider payments on deffered loans when you applie for a credit card?

[Anonymous]

Sounds like you've got this! 5% APR or maybe even 3.7% on those student loans are going to accrue interest much heftier than the $4500 remaining on the car loan.
I don't know about payments on deferred loans (the car or the student loans?) but surely any payment to lower the percentage of the current balance to the balance would be a good thing for your credit score.

[zerofire]

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@Anonymous wrote:

@I am in a fortunate position to have my car payment paid up till 9/19 and now I am wonder wheather it more benifical to make early payments on my SLs. I own about $4500 left on my autoloan at 4.71% and have about 16k in student loans ranging from 3.7%-5%. From a financial stand point I know it will save me the most money if I pay off the sl @ 5%. 

I guess does it make sence to switch to paying on my student loans early vs my car? I would still make small payments on the car. How would that effect my credit score, do banks consider payments on deffered loans when you applie for a credit card?

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I would double check on that car loan that you do not have to make any kind of payment until 9/19. When you pay ahead on a car loan that usually does not move the due date and you will still owe payment the next month. It does cause the loan to be finished earlier with less interest charged.

Now if you truly do not have payments or have spare cash to pay off loans do the 5% student loan right after all the minimum payments. That way interest will accrue slower as all the high percentages are eliminated and you will have more cash to pay off the lower percentage loans. Basicly go minimum payments and then high->low percentage. The percentage also applies to all loans so if you run out of loans above 4.71% then start paying off that car. The government can wait as you secure your wheels. Lastly any student loans on deferment still accrue interest. Banks will consider what is listed in the report. Student loans are calculated diffrently than other loans but differment will not report a payment made for the month that you have the differment on. This means banks can clearly see if you paid as agreed, are late, or are on deferment. Banks like to see payments made on time every time and the more the better.

[beutiful5678]

Are these student loans subsidized or unsubsidized? If they are unsubsidized then I would start paying on the 5% loan. If they are subsidized then I would continue to put the extra funds toward your car loan since the student loans wouldn't be accruing interest anyway.

[Anonymous]

"If they are subsidized then I would continue to put the extra funds toward your car loan since the student loans wouldn't be accruing interest anyway."
I don't think this is correct. Subsidized loans don't mean you never accrue interest. It means that under very limited circumstances the government will pay it.
"The U.S. Department of Education pays the interest on a Direct Subsidized Loan
while you’re in school at least half-time,
for the first six months after you leave school (referred to as a grace period*), and
during a period of deferment (a postponement of loan payments)." - studentaid.gov

Additionally, if you are on a repayment plan like REPAYE, not only does the interest not capitalize, it has the added benefits on how the gov pays interest:
" * If your monthly payment doesn’t cover the interest that accrued, the government pays
100% of the difference on subsidized loans for first 3 yrs, then 50% of the difference thereafter
* 50% of the difference on unsubsidized loans indefinitely" - summary: The White Coat Investor
However, since the OP is talking about making payments to pay down the debt, it's quite likely that the interest would be paid each month and still not subsdized.

[beutiful5678]

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@Anonymous wrote:
"If they are subsidized then I would continue to put the extra funds toward your car loan since the student loans wouldn't be accruing interest anyway."
I don't think this is correct. Subsidized loans don't mean you never accrue interest. It means that under very limited circumstances the government will pay it.
"The U.S. Department of Education pays the interest on a Direct Subsidized Loan
while you’re in school at least half-time,
for the first six months after you leave school (referred to as a grace period*), and
during a period of deferment (a postponement of loan payments)." - studentaid.gov

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Well, presuming that OP's loans are deferred (as noted in their signature) due to being in school, they would not be accruing interest due to the government paying the interest while the OP is in school.

Provided that this assumption is correct and OP is in school, and therefore they are not accruing interest, they should not pay extra on them since they are currently interest free due to the government's subsidy.