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Focus.

June 8th, 2007 at 01:07 pm

As I've been trying to decide where I'm moving to (I have decided to move at the end of July) I've also been thinking about my payoff strategy. Right now I'm focused on my 'consumer debt' which is all things credit card related. I've got about $15,900 at 10.9% and $10,500 at 3.99%. However, I have a small student loan that's actually a higher interest rate. It's got a balance of $2,200 at 13.25%. The reason the interest is so high is it's actually a personal loan not a federal one so I couldn't consolidate it when I did my others.

Not now, but once I get moved/settled and get my EF up to $1k, I want to start throwing all extra money at something. In my efforts to pay off all my 'consumer' debt by April 2010 I've been concentrating on the balance of the 10.9% loan.

What do you guys think? Should I keep whittling away at the 10.9% balance or shift focus to the 13.25% balance?

8 Responses to “Focus.”

  1. Ima saver Says:

    I think I would pay off the smaller loan with the higher interest rate, first!! Then take that payment and put it towards your $15,000 debt.

  2. koppur Says:

    As someone with major student loans, I say pay off the CC debt first. Although the interet is higher on the student loan, it is not considered "bad" debt. Just like a mortgage is not "bad" debt, neither is federal or personal student loans. In fact, even if you are still paying on them, making regular on time payments to a student loan (or mortgage) actually improves your credit rating. The CC debt is considered not bad, but "less good" that other kinds of debt. Credit companies look at it like a mortgage or student loan is a good investment; owing $2,000 to Visa for books and clothes is not.

    At any rate, you're doing a great job at paying down all that debt! Keep it up!

  3. monkeymama Says:

    To me bad debt is any debt that is more interest than I am earning. The student loan sounds like bad debt to me. Plus won't you feel some accomplishment to get it tackled? IT has the benefit of being both the smallest balance and highest interest.

    I'd vote to pay that sucker off. Snowball snowball snowball.

  4. homebody Says:

    I agree with Monkey and Ima...

  5. anonymous Says:

    I'd go with the 13.25% loan. It's the easiest one to pay off, which should give a nice psychological boost. And it's the highest rate, so it makes the most financial sense.

    It's always nice when circumstances make choices so easy!

  6. baselle Says:

    Targeting the 13.25% loan and paying it off will give you fortitude and momentum. Follow the numbers not the name of the loan. It might be called a student loan but since its a personal loan, you don't get any brownie points for paying it off slowly, and the interest rate is higher than your other ones. It should be your top priority.

  7. MsPeel Says:

    I know this is over a year late, but maybe it will still be helpful.

    Your student loan has a higher rate, but the principal is much less than your other loan.

    $15,900 @ 10.90% ---> For 6 months you would pay about $800 in interest (about $140 a month).

    $2,200 @ 13.25 ---> For 6 months you would pay about $130 in interest (about $20 a month)..

    The above figures are approximate because the interest you end up paying will depend on how much you pay each month, but you get the picture. In other words, your lower interest debt costs you more because the principal is much larger.

  8. MsPeel Says:

    I would have taken the 0% offer, cleared the $15,900 debt (or most of it). Save $700 to $800, and use that to pay down the $2,200.

    It's probable that before the 0% rate expires, you'd get another low interest rate balance transfer offer. Wink

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