Paying Off the Loan vs. Saving for the Future | Molly’s Money

September 11, 2014·

If this is your first time here, Molly’s Money is a regular series I write on this blog that includes ALL things personal finance – debt management, budgeting, home buying, savings, investment, etc. I am NOT a financial advisor, but I am married to one! These are just things that I have learned over the years as I struggled with my own personal finances and ultimately, became debt free in 2012. Got a question about money that you want answered? Leave it in the comments below or email me!

This week’s Molly’s Money post is another Reader Question! I LOVE these kinds of Molly’s Money posts because I LOVE answering money questions from readers – mostly because I know that if ONE person has asked the question, that means MANY of you may have that same question as well. This week’s question comes from “H” and she wants to know about paying off a loan vs. saving for her future…

Hi Molly,

First and foremost, I love your blog!  I wanted to get some advice from you – I graduated from college six years ago and I am still making monthly loan payments.  I am going to receive a bonus next month that will allow me to pay off my remaining $4,342.75 if I decide to.

I am seriously dating a guy and would like to save money for a house and a wedding as well.  I think he is going to propose soon!  Oh, and I pay off my credit card each month so other than my loan I don’t have any debt.

My question is – would you pay off your loan or save the money from the bonus in your regular savings account and pay the loan off later?  My student loan interest rate is around 5%.  I feel like I should pay off the loan entirely. If I pay off the loan I will still have some money in savings for emergencies and to tide me over.  I’d have almost eight grand left over.

Thank you in advance for your help!

Best wishes,


Hey “H”! This is a FANTASTIC question! First of all, congratulations on the upcoming engagement – such an exciting time! But most of all, congratulations on being so diligent with your finances and almost being debt free – that is HUGE.

While I feel that there are a LOT of differing opinions on this type of thing, and while EVERY situation is different and while I do believe that every situation needs to be looked at individually, I feel that in your particular situation I would 100% pay off the loan with that bonus!

The reason I say that is because heading into an engagement and a marriage with absolutely no debt is, quite literally, priceless. There are so few couples these days that do that, that you are truly setting yourself up for success that way. Also, it’s a way for you to be proud of your own accomplishments paying off that debt.

With me, that was something that was really important to me when I got married. I was SO close to becoming debt free and I didn’t want to bring that “burden” to our marriage. While I knew that my husband would have no problem with taking on some of my debt when we got married, making it “our” debt… I really wanted to satisfaction of knowing I, myself, paid it off. I paid off 99% of it myself, and then when we got married, a week later I was able to send in that final check and we were able to pay off the last 1% of it together. While we paid off that last 1% together, I knew that the other 99% of it was all me – and that was a HUGE deal and a big accomplishment for me.

Now, I know it can be tempting to take some of that bonus money and put it towards a house or a wedding, which are both wonderful things… but the longer you let that student loan go, the more interest you accrue and the more it’s costing you. Sure, it’s only 5%, but by paying off the loan ASAP, you’re saving yourself money in the long run. SO, maybe take the 5% that you WOULD have paid in interest towards the loan and put THAT towards the wedding or house savings.

Know what I mean?

While I don’t think it’s a hard and fast rule to totally give up saving money AT ALL in favor or paying off debt, in your case, I think the sooner you get rid of that loan debt, the more relieved you will feel and the more you will ENJOY saving for the wedding and future home.

I hope that helps!



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