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Forum
-> Working Women
amother
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Sun, Jan 18 2015, 6:42 pm
We are expecting a very large tax refund this year. We owe around 60k in student loans combined, and have some work we want to do around our house. We are also contemplating a few minor real estate investment opportunities. What is the best way to utilize the refund? I want to apply it all towards loans, while husband prefers to either put it in the bank or use it for repairs (don't want to get too specific as I don't want to out myself- but everything would be cosmetic upgrades, nothing urgent.) We have some savings that we could put toward the investment. Opinions? Thanks!
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doctorima
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Sun, Jan 18 2015, 7:29 pm
The rule of thumb is that paying off your loans is "locking in" a rate of return on the $ of whatever your interest rate was, meaning if you were paying 5% interest, by paying it off, you've gotten 5% return on your tax refund. If you can do better than that, it's worth it to invest it and make more than 5%, while still paying the interest on your loans.
Putting it in the bank these days will almost surely make less, so I certainly wouldn't do that, unless you need to keep this money for a down payment and don't want to use it all for the loans. As far as the RE investments, if you're confident they'll make more than you're paying on the loans, go for it. And the repairs, only you can decide how important they are. Maybe use some for repairs and some to reduce the loan?
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