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Ask Dave

We Have Loans And Dying Cars!

Megan just got a gift of money and must choose ... pay off the student loan or get ready to replace a dying car.

QUESTION: Megan and her husband received an $11,000 gift. They have $15,000 in student loans, and their cars are each over 10 years old and about to die. Where should they spend the money? Dave first wants to know what kind of cars they currently have.

ANSWER: I don’t want you driving a used car for very long, but I want you out of debt. These sound like beater cars. Put $2,000 more in the emergency fund and then you could go buy another beater car if you needed to, or you could fix up one of these automobiles and limp along while you pay off this student loan. I want you to pay off the loan so you can get some decent cars. Get rid of the debt and get your full emergency fund of 3-6 months of expenses established, and then pay cash for newer vehicles.