I have to decided to sell my bitcoins to pay off my student loans. It was a very tough decision but one that I thought was needed to be made. I’ve been carrying my student loans around with me for a long time. In the words of Dave Ramsey, I’ve had my student loans with me, it’s starting to feel like a freaking pet. So, let’s explore the reason why I chose to pay off my student loans.
Debt To Income Ratio
If you’ve been a reader of this blog, you know that I’m in the process of closing on a condo. I estimate the closing to be sometime in April 2020. Even though closing is so far away, I haven’t secured financing yet for the condo.
The condo is a non-warrantable condo which generally means that it does not meet all of Fannie Mae and Freddie Mac’s lending requirements. Accordingly, financing is very difficult to get and the loan terms are not as favorable. For more information, check out US News 2017 article entitled, “The Financial Risks of Buying a Non-Warrantable Condo.”
Regardless of the type of condo I want to purchase, the debt-to-income (DTI) ratio is always important when buying real estate. I am considering three main options for financing. The leading contender has the lowest interest rate and medium amount of cash to close requirements. However, my DTI is just above the lender’s requirement.
In order to bring my DTI in range, paying off my student loans, which is only $129 per month would help me qualify for the loan.
Student Loans Payoff Amount
Let’s get into specifics.
As of today’s writing, the remaining balance on my student loans is $8379.57, with an interest rate of 2.625%. The monthly payment is $129.66 per month.
What I didn’t intuit until recently (after watching a random YouTube video) was that my student loans was comprised of two separate payments: Subsidized Consolidation Loan and an Un-subsidized Consolidation Loan. I always knew this but somehow forgot.
The subsidized loan balance is $3775.74 with a monthly payment of $58.51 and the un-subsidized loan balance is $4590.64 with a monthly payment of $71.15
I know I can get rid of at least one of these loans by April, but I’m going to fight to get rid of them both.
The Plan
So, here is my plan to payoff my student loans by April 2020. The first thing I will do is liquidate my bitcoins! You heard that right. I’ve been dollar cost averaging my way into bitcoins for the past year at about $100 per month.
At the time of this writing, the total value of my bitcoins is about $2800. I still want to invest in bitcoins, but I will resume my bitcoin contributions (as well as my dividend portfolio contributions) after I close on the condo.
I really didn’t want to sell, but I think I’m putting the funds to good use.
In addition, my sister owes me about $1500 and she will give that back to me in about two weeks. Once I get that, I’ll be putting those funds into my paying off my student loans.
Between bitcoins and my sister, that should roughly take care of half of my student loans. Regarding the other half, I really plan on doing my best to put every spare money I have into payoff off my debt. Having done a projected budget, I’m still short about $2000, but where there’s a will, there’s a way.
The Caveat
Although I will liquidate my bitcoins to preserve capital (as the market can always drop), I actually won’t send any money to pay off the student loans just yet. Say what? Let me explain.
Based on my DTI, I qualify with two other lenders. Because of the non-warrantable nature of the condo, I’m not 100% convinced that this lender will be able to qualify the condo under their program. My mortgage broker with this company is familiar with the area, and the nature of the condo I’m buying. He actually owns several units at a nearby condo down the street. But, I want to ensure that the condo meets their lending requirements before I pull the trigger and spend the money I saved towards paying down on my student loans. Otherwise, I would rather use that money for other things (such as buying furniture).
Regardless of which lender I choose, it is increasingly likely that I will have to liquidate the remaining stocks in my dividend portfolio to fully fund the closing costs. I could choose one of the three lenders that has the least amount of down payment requirements, but also have the most expensive interest rate and monthly payment requirements on the condo. If I go with that lender, I wouldn’t have to liquidate my stocks, but I don’t think that option makes the most financial sense in the long run.
The Conclusion
Although I didn’t want to, there’s a reasonable chance that I will be paying off my student loans come April 2020. I will have to liquidate my bitcoins to do so. My initial goal was to payoff my car in 2020 before tackling the student loans. After all, the monthly payment on my car is $356 whereas the monthly payment on my student loans is only $129.
I can tell you though, that I won’t be shedding any tears once my loans are paid off. They aren’t my freaking pets!
Do you think I should sell my bitcoins to payoff my student loans? What are your thoughts? Let me know below by commenting below.
I can’t blame you for making that decision. Once we get the car loan down lower it’s going to be very tempting to either sell some stocks, bitcoin or go without re-investing dividends to try and get that paid off quicker and be done with it.
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Looks like we are on a similar journey JC. Definitely good luck with yours.
Dont sell! Look at the bitcoin price!
Its time to buy!
I wish bitcoin prices are what they were.
I would think it’s better to sell your car, which is a depreciating asset, as opposed to Bitcoin, which we saw appreciated immensely in 2020. Sell your fancy car, buy a beater for $2000 outright and stop those crazy $300 car payments each month!
Not a bad point KB. I actually never ended up selling my bitcoins. Although the price of bitcoin has risen, there was never any guarantees that it would. I might still sell my bitcoins, but it won’t be to pay off my student loans, but rather to finance the remaining funds needed for a condo.
Regarding getting a beater for $2000, I absolutely understand how that would affect my bottom line financially. However, I’ve been there done that, and right now, I prioritize having a reliable vehicle for work. There was a time when I went through two separate cheap cars in a row (thinking they were reliable at the time), and that situation forced me to get a lease for a my third car. I never want to be placed in that situation again. In any case, this may be all academic because I will likely be paying off the car as part of the bank’s requirement to get a loan for the condo. I appreciate the input nonetheless.
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