Pay off Debts now Yes or No?

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silversalmon
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Pay off Debts now Yes or No?

Curious what you all think about this subject, given the current economic conditions. So the US is devaluing the currency, hoping to pay off their debts cheaply. Should we do the same? Should we let the US completely destroy the dollar first, and then pay off all of our obligation with cheap dollars, once the currency is sufficiently devalued?

I firmly believe if you took the loan out, you should pay it. However, when to pay, is more my question, especially if it's student loans at low interest rates, say 3 %.

Would your money be better allocated to  physical gold and silver now, or to paying off remaining debts first, and then buying gold and silver or a combo of the two options?

PLEASE provide your input. Thanks, and be nice. This is a thought excercise.

 
Edited by admin on 11/08/2014 - 06:06
Pablo
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Here's what we're doing

High Interest Credit Cards - Rolling it to a lower rate card and paying it off (highest interest % paid off first).

Mortgage - Refinance into a fixed rate and making regular payments and nothing extra

Low Interest loans (student loans under 3%) - Making the regular payments and nothing extra (interest is less than inflation)

Two thoughts -

1) Check your loan documents and see if they can revalue the principal in the event of a currency collapse. Even if they can't you can bet they will try! When shopping around for a refi one of the mortgagers (Bank of America) said they could revalue the principal under some (nebulous) conditions. We walked out of there.

2) The govt may be able to pay their debts off with cheap dollars but you and I are at the bottom of the food chain and will have probably no such luxury! The banks/govt will get what they want, they always do!

Eric Original
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It's a balancing act

It's a balancing act between paying down debt and stacking physical.  Tough to do both.  Pretty much have a choice to make anytime you've got some cash in your checking account.

Stuff with lower rates we're paying the minimum.  Higher rate credit card balances are getting paid as fast as we can.  But still wanting to stack as well.  I spent pretty much all of 2010 stacking.  Now spending most of 2011 paying debt.

I don't think it's wise to take an approach that says inflation will totally bail us out, etc.  The dollar might not turn to dust soon!  Still need prudent household cash management in case it doesn't.

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HappyNow
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My preference is first to

My preference is first to debts with interest higher than 6% interest rate.   When those are paid off then investing makes sense for me.

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SilverTree
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No.

No.

SilverFocker
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And no again

IMO, do not pay off debt if it keeps you from stacking. I do not feel sorry for anyone with high CC debt, this is the most ignorant use of personal funds that exist today. I used to pay half pymt extra on my monthly mortgage thinking this was the right thing until QE started, now Skank of America gets the min, nothing more since TPTB decided inflation was the way to cure all, I will ride that train with my mortgage until I see it not benefiting my plans, until then, I use the extra to stack in hopes that I am wrong. If I am not, then paying off debts will be the last thing I will worry about.

Dr Durden
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You might want to consider

You might want to consider who will own that debt once all the dust settles. Just sayin. We're in perilous times and I haven't seen anyone here argue that things won't get ugly. So, I suppose, it's just a matter of how bad.

I'd personally feel a lot better not owning anyone anything than having to go to work right now to buy PM's which future price is unknown. 

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No

no

SilverFocker
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Dr Durden wrote: You might

Dr Durden wrote:

You might want to consider who will own that debt once all the dust settles. Just sayin. We're in perilous times and I haven't seen anyone here argue that things won't get ugly. So, I suppose, it's just a matter of how bad.

I'd personally feel a lot better not owning anyone anything than having to go to work right now to buy PM's which future price is unknown. 

Does it really matter who will own the debt? If the dollar goes to shit the what value will said shit have? This is not a buy now pay later car deal, this is a prepare now by not paying more than needed if you still have things on the list that need to be accounted for. Then you need to account for said PM's bought instead of paying off long term debts in todays dollar vs. tomorrows dollar, just in case we are wrong. To be sure , none of us knows the future PM prices , and we also don't know if our house will burn, but we buy insurance just in case said shit happens.

silversalmon
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What a great bag of answers

Wow, such an array of answers. I think I'll go the Eric route. I spent this whole year stacking, so maybe I'll spend most of next year getting freedom from slavery ( Debt). I did the math, if I put a BIG chunk of funds into it, I can get her done in 18 months, plus some left over for PMs, but nothing else, maybe some beans and rice.

I like the idea of not owing anyone anything, and picking up and going when I l want to and where I want to, sans debt and payments. No kids, no wife, no pets, no car payment, no mortgage, no cell phone payments, no costly vices, except for travelling, and I'm not doing much of that until I chop this debt down in 18 months. At least that's the plan for the moment. I get the feeling there won't be a loan jubilee ( forgiveness), and these bastards will squeeze the blood out of turnips. Those with cash, and credit will buy up all things on the cheap. I wanna be on that gravy train. Peak oil be damned.

I only have student loans left (3%, 3%, and 3.4%), paid off the credit card, and I don't own any cards at the moment, only using cash.

I haven't made up my mind completely, so keep the answers flowing boys and girls!

jackmeoff
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Pay with gold/silver later.

The only thing I am paying off is my wifes student loan debt. Anything else can go to bankruptcy. Dont get me worng I have no intentions in going into bankruptcy but I am also not that worried about it either at the moment. Why would I pay anything even if it is a credit card with 10% if silver can do 5x's that in a year. Now the only reason I dont have a problem with this is because I make enough to be able to pay off the card if silver or gold takes a dive. The way i look at it is this.

If I have 50,000 in debt that is

1428 oz of silver @ 35

1111 oz of silver @ 45

909 oz of silver @ 55

769 oz of silver @ 65.

I am looking for 46-52 by year end from my charts though anything can happen but if things are going to get real bad I would rather have gold/silver than worry about being debt free. For me I have 375,000 left in debt from home and business loans ect... but would rather pay it off with less silver. @ 75 silver that is only 5000 oz. Also if things get real ugly you may not stay in the home you have now. You may not even want to stay in the country you live in depending on what new laws they pull out of their butts. I would not spend the 5000 to be debt free if I see things getting bad. Besides 5000 oz of silver is a lot of pesos or whatever they use in South America. Better freshen up on my Spanish.

silversalmon
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surprised by answers

I'm so accustomed to people yelling pay off your debts that it finally sunk in, but I hear what you guys are saying too. Take care of the house first. This a a tough balancing act. I have variable 3.4% student loan, maybe I should go after that one first. I'll keep you abreast of my situation.  Finding a balance will be the key. I hate that you can't discharge student loan debt, which is why I want to get rid of it. Maybe I'm listening too much to the Dave Ramsey folks :-) keep the answers flowing folks. This is a good conversation. Thanks for all the opinions!

tmosley
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You make minimum payments on

You make minimum payments on most debt.  I currently make minimum payments on my car loan and student debt (I also defer the student debt as long as humanly possible).  After the car is paid off, I will never take out a car loan again--rather I will buy a reasonable used car, and run it into the ground, doing only cheap maintenance like oil and fluid changes, and replacing tires/belt/hoses.

Credit card debt is no-recourse unless the level is above $10,000 on a particular card, in which case you might get sued.  For those, I would either pay a little over the minimum if you need the card, or just default if you don't (be sure you don't need credit, ie you own your home already and don't want to move).  If you choose to take this path, be certain that you are able to save money first.  If you save up a few thousand dollars, then you don't need the card.  

Put the money you save by not paying down debt into gold and silver to avoid inflation.  You can pay down the debt later if you wish with the paper proceeds from your wise investment.

Tripel_Play
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Get out of debt.

It's amusing when people say that they're out of debt. Really? You paid off your car or your house, and so you're out of debt? What about your share of the national debt, which is currently at $170K per person?

thecoloredsky
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student loan thoughts

I've been deferring my student loans for 6 years, haven't paid a penny. What I was wondering, the original lender at some point in the last couple years transferred the loan over to Citi. I was never notified about this change, any recourse on this? Probably not, wishful thinking. This is the only debt I have even though I keep getting calls from scam debt recovery companies.

kenklave
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Sorry, no.  You have no claim

Sorry, no.  You have no claim to the debt.  It is the creditor who has the right to the payments and may assign or sell that right as it wishes.  The purpose of notification is so that the debtor pays the right entity.  If you had been paying the original creditor when the debt had been assigned/sold then you would get credit for what you paid.  If you hadn't been paying then there is nothing that was affected.

diegeiro
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@silversalmon

It is always helpful to pay above the minimum payment on all loans, even if it is just a small amount because that extra money goes directly to principal, or at least it should. However, many of the big banks will hold that money in some kind of escrow instead of applying it to principal. We found that happening on our mortgage when we tried to make extra principal payments. We also found the extra principal we thought we were paying on student loan being held in some kind of escrow. It was a real pain to get them to do what we wanted on the student loan, instead they kept telling us that no payment was due since they were treating it as if we were paying the next payment in advance, (not what we wanted). By doing that they were not making a principal payment and it was not reducing the banks mark to maturity interest payment income. Sometimes the best way to deal with these kinds of problems is to send the bank a signed letter (Letter of Authorization) telling them in very simple language what it is that you want them to do with the extra money being sent. Phone conversations won't always get it done but an LOA should do it because the letter then becomes a legal document. Phone conversations have also become legally binding documents in some instances, but if you are not the one doing the recording, that conversation will probably not be used in your favor.

To make an LOA you just need to put your name and address on the top, then the name and address of the banking institution followed by the date and reference your account number. Place the basic instructions in the body, then the loan holder signs at the bottom. If you want you can send it certified to be on the safe side to prove receipt.

Keep in mind that when you refinance anything the interest is always paid up front so if you refinance an older loan, the upfront interest starts all over again, so if the loan is maturing you may be better off paying extra in order to further reduce principal. Keep in mind there are two kinds of loan risks. One is default (failure to pay) the other is prepayment risk. The risk of default is that the bank/loan owner loses the principal and interest. The risk of prepayment is they lose the interest fees which are substantially more than just the principal. Prepayer's are now considered the new deadbeats because they are not allowing the banks to make money off them.

My daughter had a heck of a time getting her student loan co's to properly apply the extra she paid each month. They would not let her do it via any online transaction. (This the way younger people are doing their banking today). The only way they allowed her to pay extra principal payments was by requiring her to send her payment via check every month. I think she also used an LOA stating that she wanted the extra money sent each month to be applied to principal.  The banks really want the full mark to maturity (principal plus all the compounded interest) amount on the student loans they hold and are not very helpful regarding making principal payments. She became debt free within 18 months after finishing school. I am now encouraging her to buy silver and gold on the dips.

There are compound interest calculators that you can find online that will show you how much you are paying in interest over the course of a loan. Anyone with a long term loan should plug the figures in to see how the compounding of interest works and what they actually end up paying in interest over the time-frame of their loan. It is surprising to see it in black and white.

We dont know how this will all play out and when a collapse will actually occur so buying as much PM's as possible and paying down all debt will be key to survival. Even with debt paid down there will still be property taxes to pay.

Hope this helps any of you who are out there trying to pay down your debt and become debt free.

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hpx
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Adapt and adjust

If I was an American, I wouldn't pay down debt until it was starting to feel urgent (meaning someone may come knocking on your door unless you start making a serious effort). The "dollar turns to trash"-scenario is too likely at this point. But there is another way of thinking about this as well : Calculate how many ounces of gold or silver you owe,  and start stacking. If you think that prices for gold and silver will fall for a while, pay off debt. If you think prices will rise, then keep stacking. If things get sticky, you may have to sell part of your stack and pay off more though.

With the steady trend upwards in both gold and silver, I am leaning mostly towards favoring stacking over paying down. Obviously this may not be true if you have some adjustable-rate loan of any kind, since interest on it may rocket above the annual appreciation for metals.

I'm not a US citizen, rather I come from a country where 75% use adjustable rate mortgages because "it's cheaper long term". Like hell it is, I said, and locked down rates near the bottom roughly a year ago. The adjustable rate is now moving above where my locked down rates are, and is likely to continue upwards (you may guess what idiot country I live in if you wish). My point being that with this setup, I'm fairly comfortable even if the S hits the F, because my rates are not likely to move higher. Also, I do pay down some of the debt, since this will move me deeper into the pile of "customers we needn't bother with since we got larger problems", meaning that there is a shitload of idiots who are going to be forced into re-negotiation if the value of their homes fall enough (incidentally, we are one of the last countries to experience the popping of the housing bubble as well. at 5 years after the US, we are slightly retarded). Anything you can do to make you "invisible" to whoever lent you money is probably a good move, even if that means some other poor sucker is going to end up in trouble before you.

pourty
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Pay them off

Why on earth you would hold onto debts is beyond me.Sure, PM's are generally going up, and we all believe someday the currency collapse will happen.  But you don't know when.

What if they manage to hold it off for a decade or more?  What if they manage to suppress metals prices? The only sure thing is to get yourself out of debt.

I know everyone will clobber me for saying it, but I see no good reason to keep debts when you simply cannot predict the future.  Keeping large debts in hope of a currency collapse is a fool's game.  Beyond that, there is a peace of mind that comes with knowing you don't owe anyone anything... and it's priceless.

Mr. Picklepants
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Default, if you are along in

Default, if you are along in your preperations and have several months worth of bills, and if your brave that includes student loans.  You CAN default on them. they will just try to garnish or take your tax return. If you work for yourself, they can't garnish. And if you owe at the end of the year, what are they going to take out of your tax return?     I wish enough people would do this on principle alone, but I know people that simply can't pay theirs. Enslaved at 18. Bring on the dollar collapse.

silversalmon
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pourty wrote: Why on earth

pourty wrote:

Why on earth you would hold onto debts is beyond me.Sure, PM's are generally going up, and we all believe someday the currency collapse will happen.  But you don't know when.

What if they manage to hold it off for a decade or more?  What if they manage to suppress metals prices? The only sure thing is to get yourself out of debt.

I know everyone will clobber me for saying it, but I see no good reason to keep debts when you simply cannot predict the future.  Keeping large debts in hope of a currency collapse is a fool's game.  Beyond that, there is a peace of mind that comes with knowing you don't owe anyone anything... and it's priceless.

Thanks Pourty! I was wondering why paying off the debts, was the least favorable option here. I'm open to the idea of minimum payments, but my brain keeps screaming FREEDOMMM, FREEDOM, FREEDOMMMMM! Pay it off stupid!

I did the math, if I get a job I just applied for, i could pay it all off in only 18 months. That's really tempting. But I LOVE stacking as well. I'll let you guys know how it works out!

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