so i have some money that was an inheritance that i got a few months ago that i am going to use to pay off some student loans. the loans right now are in a grace period in which no interest is charged, so the money is just sitting in a normal savings account making crappy interest. i was thinking of moving it to a savings account like ING Direct or HSBC Online where they have a return of 3.5% or 4%, respectively. I will need to withdraw the money in April to pay off the loan before it goes into repayment, so something longer term like a CD won't work. i know ING Direct used to give like $25 for signing up if you were referred from someone else, are they still doing that? also, what are the rules with closing an account and fees and all that fun stuff? thanks.
ING Direct or online savings account
- Thread starter jred321
- Start date
I have an ING account but I don't have my account number at work. I'm getting something like 3.8% interest on my money.
I'm not sure if they are still offering the $25 signup promotion. If I could log in now I could check but it would have to wait until this evening.
I keep $500 in my traditional savings account and the rest of my money goes into the ING account. It takes 3-4 days to transfer money out of the account so I want to have a little cash on hand in case something happens. I also setup their automatic savings plan and it transfers money from my checking account every time I get paid. It's a great way to save money.
I'm not sure if they are still offering the $25 signup promotion. If I could log in now I could check but it would have to wait until this evening.
I keep $500 in my traditional savings account and the rest of my money goes into the ING account. It takes 3-4 days to transfer money out of the account so I want to have a little cash on hand in case something happens. I also setup their automatic savings plan and it transfers money from my checking account every time I get paid. It's a great way to save money.
jred321 said:
First how much money are we talking and is all of it going to be used when you pay off your student loans? Also what will the rate on your student loans be and do you have any other loans or credit card balances that have a higher percentage rate?
Because honestly unless we are talking in the hundred thousand or more range it really won't be worth while to put it into an account just to pull it all back out 5 months later, you might as well pay off the loans now. Unless you have other loans or credit card that are charging you interest right now and those rates are higher then what your student loan rate will be, which the almost always are, then you would be best off paying them off right away.
I think he has the right idea. The loans are in a no-interest grace period. That means there is no benefit in paying them now. Instead, gain 6-months worth of interest by putting it into an ING account. At the end of the 6-months you will be able to pay off a few bucks more than you can right now.
However, sometimes having the cash is better than paying off those loans. By paying them off you will save money. But think about it. It basically means you will stop paying those loans 17 years from now instead of 20 (depending on how much you actually have and how much you will owe).
If you have credit card debt its obvious that you should pay that off now since the interest rates on CCs are outragious. If you don't have any debt right now other than student loans consider your future.
How soon will you be buying a new car or perhaps a condo or home? Having an extra 10K or 20K to put down on a new home will make a HUGE difference in the interest rate you get on your mortgage. The difference might be so great that it will more than make up for not paying off your student loans.
Do you understand what I'm getting at?
Example:
You have 20K of inheritance.
You consolidated your student loans so you need to pay 50K over 20 years.
Lets guess and say the interest rate will be 6%.
Without doing anything you would pay about $358/mo.
If you put your inheritance to the loan your payment would drop to $215/mo.
Now lets say you want to buy a 150K home and a 30yr mortgage.
With good credit and zero down your interest rate would be about 7.5% and you would pay about $1049/mo.
If you saved the inheritance and put it towards your home you could probably get a 7.0% rate. A mortgage on 130K would be about $864/mo.
So to total things up, if you put the money into your student loan debt you will pay $1264/mo. If you put the money into your mortgage you will pay $1222/mo.
Ok so its only a difference of $42 ($500/yr). But I think it explains my point. Student loan interest rates are usually pretty low and it is a small amount of money compared to a mortgage. Mortgage rates however are more tied into how much cash you have on hand and how good your credit score is.
My recommendation is to put the money into the ING account (or a CD or Mutual Fund) until you are ready to buy a home.
edit:
150K buys you a trailer in Massachusetts. I'm not sure what you'll get in CT. I ran the numbers again for 250K and the difference increases (still in favor of putting the money towards the mortgage).
However, sometimes having the cash is better than paying off those loans. By paying them off you will save money. But think about it. It basically means you will stop paying those loans 17 years from now instead of 20 (depending on how much you actually have and how much you will owe).
If you have credit card debt its obvious that you should pay that off now since the interest rates on CCs are outragious. If you don't have any debt right now other than student loans consider your future.
How soon will you be buying a new car or perhaps a condo or home? Having an extra 10K or 20K to put down on a new home will make a HUGE difference in the interest rate you get on your mortgage. The difference might be so great that it will more than make up for not paying off your student loans.
Do you understand what I'm getting at?
Example:
You have 20K of inheritance.
You consolidated your student loans so you need to pay 50K over 20 years.
Lets guess and say the interest rate will be 6%.
Without doing anything you would pay about $358/mo.
If you put your inheritance to the loan your payment would drop to $215/mo.
Now lets say you want to buy a 150K home and a 30yr mortgage.
With good credit and zero down your interest rate would be about 7.5% and you would pay about $1049/mo.
If you saved the inheritance and put it towards your home you could probably get a 7.0% rate. A mortgage on 130K would be about $864/mo.
So to total things up, if you put the money into your student loan debt you will pay $1264/mo. If you put the money into your mortgage you will pay $1222/mo.
Ok so its only a difference of $42 ($500/yr). But I think it explains my point. Student loan interest rates are usually pretty low and it is a small amount of money compared to a mortgage. Mortgage rates however are more tied into how much cash you have on hand and how good your credit score is.
My recommendation is to put the money into the ING account (or a CD or Mutual Fund) until you are ready to buy a home.
edit:
150K buys you a trailer in Massachusetts. I'm not sure what you'll get in CT. I ran the numbers again for 250K and the difference increases (still in favor of putting the money towards the mortgage).
Last edited:
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ok let me answer some questions. first, the amount is $6000 that has to be spent on paying off my loans, as that is what it was left to me for. i don't have any credit card debt, my car is financed at 0%, i'm a good 3-4 years off from getting a house (if i stay here, gonna build my own on free land so it'll end up around $150k or so, $250k is about the average price around here, near the shore it's way more), and yes i do have other student loans at a slightly higher interest rate but the loan i plan to pay off is a shorter term loan so what i gain out of it is a lower monthly payment for now while i am just starting out in life by completely eliminating this loan and never having to worry about it. i do have the full amount to pay it off now ($9250 i think), but since i'm paying no interest on it until april, i might as well make a few bucks (true it won't be much, but it's better than nothing) off of it instead of letting the bank make tons off of it. it has literally just been sitting in a normal savings account at whatever crappy percent they give you since july. back then i probably should have put it in a CD but i had other things to worry about so it just sat, plus i didn't know i wasn't paying interest on it until last month when i called to ask when it was going into repayment which i thought was december 
chuyler, i'll pm you right now
chuyler, i'll pm you right now
