Pay off debt or save?

ok so my boyfriend and i have a disagreement. i have a student loan of 26,000 and he has a car loan of 13,000. he wants to pay off all our debts and then save for our house. or whatever. i say. we are always going to have debt the rest of our lives. ( car payments, when we buy our house. etc) i say we need to save. for our wedding which is going to be in a couple of years. which will be here in no time. i think we'll be engaged in about a year he says. then he says oh i don't want to get engaged until all our debts are paid. but we are always going to be in debt. oh i pay 200 amonth on my loan. i don't have to pay it for another 4 years but i'm starting now to avoid hight interest rates. so whose right? do we save or pay off our debts? thanks so much.

I think it's great that you two are talking about this stuff now, before you're married -- it's really important!

I would treat "pre-nuptual" debt as an individual responsibility -- you pay yours, and he pays his -- at least until you are married. If you are uncomfortable mixing this debt even afterwards, work out a pre-nuptual agreement to specify who is responsible for what. I would be careful about a scenario where you are putting all of *your* money towards *your boyfriends debts*.

I think you're right to save first, then pay down debt. Since the economy is probably heading for a rough patch, you need an emergency fund (in a high interest rate savings account) with enough to cover at least 6 months of your living expenses. Since you aren't married yet, you should each keep separate accounts -- that way if things don't turn out as you hope, you'll still have your money.

I am not sure why you don't have pay your student loan for 4 years -- do you have an in-school deferment? In any case, since you say you're not in repayment, you could build your fund quicker by putting the $200/month toward savings instead of the loan.

If your debt is only the student loan (you have no credit card debt to tackle first) and that loan is NOT in repayment, why do you want to give the loan company your money for free? You could at least put in a savings account at 4-5% interest for the next 4 years and earn some interest! Or better yet, start a Roth IRA to start on your retirement.

Finally, once your loan comes due, if it is a private student loan (NOT a federally-backed loan like a Perkins, FFEL/Stafford, etc.), then I would look to pay it off ASAP. Private student loans are terrible because (a) they have high, variable interest rates, (b) have few of the protections/deferments that federal loans offer, and (c) can't be relieved through bankruptcy. You want these loans gone.

If you have more than 1 federal loan, you can look to consolidate at a lower interest rate. Mine are at 3%, and I have no plans to pay more than the minimum since I can earn more putting that extra money elsewhere.

It sounds like you are being responsible with your money. Good luck!
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PS - Having read other answers, it seems most people think debt itself is a bad thing. While you do NOT have to live a life in debt, wise use of credit lets you invest for a better future: student loans are an investment in yourself; a mortgage gives you a place of your own; a loan at a low interest rate can be invested in something with a higher interest rate. But private student loans are not a great way to invest in education. And buying a new car is a terrible waste of money -- especially if you use a loan to do it. And you absolutely must have cash readily available if something bad happens. It's really hard to come up with living expenses without savings. People in that case accumulate the worst type of debt -- on their credit cards.

I'm sorry to say, but he's right and here's why : Having debt is a real downside to buy a house much more then the upside of having savings (trust me, I am in the process of buying a house). Without debts, banks will be more willing to give you a big mortgage because in the end, they substract the amount of debt you have of the mortgage or something like that - big downside.
Also, unless your money is well placed, you barely make a penny on a 100$ sitting in a bank per month - while with debt, the interest rate as you pointed out can become really high.
It is not true that you will have debt all your life and in my experience, you will be much more happy knowing you can live a debt free life - something banks or any other loaner won't ever tell you. Debt are a responsability, sure sometimes it is necessary but the time you can spend without having any is a blessing.

You generally should pay off your higher interest debt before building savings beyond a reasonable emergency fund ($500-1,000). Otherwise, the student loan can probably wait if it has a low fixed rate.

You need to do both! You should pay your debts and also put some money into a savings account. No matter what you will always have bills to pay. Work on not spending over your income. You need to budget your money. Maybe even get counseling for this matter. Good luck. :--#)

Pay debts first. Always.

have a simple wedding. Don't go further in debt just to satisfy some "princess" fetish.

Change your attitude - don't think you'll always be in debt. Your goal should be to get out of debt as soon as you can (whether it's a year, 10 years, or 30 years), then stay out of debt.

Definitely pay off debts first, and you are worng about "we are going to always have debts for the rest of our lives." Besides, with that much loans that you owe, it is HARDER to get APPROVED a mortgage loan. So only upsides (more than one) to pay off debt first. By the one, since you are aware of the HIGH INTEREST...that is another reason to pay off debts FIRST. On your personal issue (if you don't mind me say this), I think both people need to have same values in life....otherwise you will have communication problem in the future. I think that is why he doesn't not want to be engage NOW. You both are SO DIFFERENT on the values of debts and money. Well, good luck!!

Pay off the debt.
There is no reason that you should always have debt for the rest of your lives. And honestly if my fiancee thought that way I would think twice about marrying her.
You can get married for $50 at the justice of the peace. Hopefully you don't have to save up for that...

I am not trying to be mean. Just realistic. Most marriages in this country fail due to fights and disagreements over guess what? MONEY! The idea of you staying in debt so that you can save money to pay for some fancy wedding, which lasts all of one day, is completely ludicrous.

Live smart. Being a slave to the banks is no way to go through life. Nor is it any way to start a marriage.

How about a little bit of both?

student loans usually have low fixed rates (don't know if this is the case with you) and, in my opinion, should be dragged on as long as possible, scenario:

Student Loan: You still owe $10,000 @ 1.9% - you could put $10,000 in a CD or Paypal Account earning almost 5% thus earning an additional 3.1% on money you would have used to pay off the loan.

As far as a car Loan is concerned - If you have the money to pay it off it's really up to your personal threshold for debt. I pay as little into cars as possible because they depreciate and I don't want all of my cash tied up in something that I could run off of a bridge and render useless, I'd rather have the cash in my pocket.

It all comes down to what you are comfortable with and no matter what you decide to do the important thing is having the discipline to follow through with the decision for the long term.

You can't save until you pay this particular debt down.

How about paying off debt as priority then saving. The way I view debt is as long as you have it, you live in a very precarious way, what if you loose your job? what is you get sick? what if....then you still have those debts to worry about, unlike if you are debt free (or at least minimally in debt) and have enough savings to buy things, when you go into debt you are borrowing from your future, including your married life.

Do both.

Look at the rate of the debt...and the rate of what u can earn if invested instead.

Till this year, I had debt that ranged from zero % to 25% in interest rate. But I had investments earning anywhere from 6% to 25% also.

As of this year, I paid off the 'higher than 9% debt' Because I can easily earn in investments a minimum of 10% and usualy get 15-25%.

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