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Low Interest Loan Repayment or CD/HY Savings (self.personalfinance)

submitted 10 months ago by Copernican to c/[email protected]

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Looking to pay off $15k of student loan debt of my partner. It's something we could wipe out with cash on hand if we wanted to relatively quickly. But one of the loans is 4.5%. Am I better off just riding that out but keeping the cash in for that loan in a HY savings account or keep reinvesting it in short term CD's that have a 5% return and to have more liquidity?

There's a part of me that used to really enjoy the piece of mind of being debt free when I paid off my student loans. But now that I'm more financially established and disciplined, I'm wondering if it's better to pay it off slowly.

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[–] [email protected] 3 points 10 months ago (3 children)

Don't forget, you have to pay taxes on all income, including interest. So your 5% APY is not 5% cash in hand. I would recommend that you pay off the loans

[–] Copernican 3 points 10 months ago (2 children)

Thanks. I didn't even consider tax implications.

[–] sevan 1 points 10 months ago

I agree with this recommendation. After taxes, paying off the loan is probably slightly more profitable and improves your monthly cash flow.

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