Should I quit contributing to 401k and put the extra money I’ll get paid to pay off debt?
I owe 37k on a home equity line of credit, and another 22k on a car loan. The interest rates on those loans arent that bad (7% and 8%) but I am paying a lot in interest every month. I have been putting the max (15%) of my paycheck into 401k. Does it make sense to reduce my 401k contribution to 1% (so I get the company match) so I can pay off loans faster?
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if your 401K avg return is higher than 7-8% than don’t do it. as we are going into the recession then the 401K returns are probably doing pretty bad so might as well focus on your loans for now. good idea to keep getting co match – free money
without knowing the whole picture, i suggest you look to cut other expenses, or increase income.
The home equity loan is fine since its interest is tax deductable. But the car loans gotta go. Postpone your 401 contribution until you get in control of you debt.
Does your company only match 1%? You need to look at how much you would save if you kept your 4o1k as it is or if you could save money by paying off your debts…….You may want to contact someone that knows how to figure this out…and not Yahoo Answers…….
ok,well I am not good at money matters and figuring financial things out,but, umm if it were me, i would let the home loan ride since i know it is tax deductable,,,,drop your 401k to the1% and get the company match (there is nothing wrong with free money)
and work on paying off that auto loan with the little extra you bring home
another option is to leave things the way they are – and work 2 extra days a week at your job or get a 2nd part time job and put all that money towards the loans
i know easier said then done – people do do it though – i have done it myself
Cut back your contributions to 8%.
Apply the entire amount of that difference to your car loan. Pay that off first. Until then make the minimum on the home equity loan.
Then make an extra 10% payment to the car loan each month if possible.
example
car payment $440
401k change $120
10% $44
New Payment $604
If you are not going to make that payment then just keep things as they are.
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New car payment