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I agree. I can't believe all the posts implying it is better to knock off several low interest loans than it is to knock of one high interest loan.
In fact, if the rate(s) is low enough such as the mortgage - don't accelerate the payments at all. Invest the money. Perhaps refinance the mortgage if possible. My 15 year fixed is 3.675% (I love writing that) no way would I pay that down.
yeah, i have federal student loans at 1.675% which i'll never make an extra payment on. my 30 year fixed is 3.875%. unlikely i'll ever make much of an extra payment on that, though i may when i have no other debts (student loans). it's just too low cost.
Maybe this is obvious to others, but I can't reach a conclusion.
As you can see from the responses, we can't reach a conclusive answer either. Everyone has their opinion, but those opinions are as different as the people.
From what you said, you are motivated without needing to get rid of small debts first. With that in mind, I think that most would agree, if they really think about it, that your best option is to go after the highest interest loans. At the moment, that means the car, but due to the variable rate on the student loans, that 4% loan is a contender as well.
Personal choice at that point. Either pay off the car and then roll the minimum car payment into attacking the large student loan, or start with it off the bat.
I'm going to change my vote slightly from what I said before. Given that the variable rate increase is capped each year, I would pay off the car first, as the highest current interest rate, so you can roll that payment toward the higher interest student loan. Then throw everything you can at it. I would continue just making the minimum payment on the low interest student loan. When you reach the point you can pay it off in one month's extra payment, you may opt to do that, to be done with it. But I wouldn't bother, even with that. Just pay the minimums on it until it is gone, it is practically a free loan at this point.
As you can see from the responses, we can't reach a conclusive answer either. Everyone has their opinion, but those opinions are as different as the people.
From what you said, you are motivated without needing to get rid of small debts first. With that in mind, I think that most would agree, if they really think about it, that your best option is to go after the highest interest loans. At the moment, that means the car, but due to the variable rate on the student loans, that 4% loan is a contender as well.
Personal choice at that point. Either pay off the car and then roll the minimum car payment into attacking the large student loan, or start with it off the bat.
I'm going to change my vote slightly from what I said before. Given that the variable rate increase is capped each year, I would pay off the car first, as the highest current interest rate, so you can roll that payment toward the higher interest student loan. Then throw everything you can at it. I would continue just making the minimum payment on the low interest student loan. When you reach the point you can pay it off in one month's extra payment, you may opt to do that, to be done with it. But I wouldn't bother, even with that. Just pay the minimums on it until it is gone, it is practically a free loan at this point.
really, it's not as objective or opinionated as people want to make it out to be.
facts are that the highest benefit is to pay extra money to highest cost debt first.
i think what you said about payment order is spot on for the highest benefit to his financial situation. also, once the car loan is paid off, he has the ability to scale back his comprehensive insurance coverage whenever he chooses to, based of course on the value of the car at the time. so if he ever needs extra money, that's an option to him, though depending on the value of the car, it could be a risky option...it's still an option.
Pay off the car loan first. Given the tax deductions granted by your mortgage and student loans, you car loan has the highest rate.
Student loan interest is only a taxable income adjustment IF one makes under the federal approved income cap. Once my salary passed the $50k's, I no longer qualified for the interest adjustment. So the tax benefits of holding onto student loans are potentially nil or limited - not infinite- to OP.
The cap on claiming student loan interest is 2500 assuming you don't exceed the income criteria.
And my private loans are consolidated. I'm not concerned with making 2 versus 20 payments a month as theyre set up as automatic payments anyhow. (immediate interest rate deduction that way)
The cap on claiming student loan interest is 2500 assuming you don't exceed the income criteria.
And my private loans are consolidated. I'm not concerned with making 2 versus 20 payments a month as theyre set up as automatic payments anyhow. (immediate interest rate deduction that way)
working on being debt free one day.
yeah i do the auto payment option. get the rate reduction for that, and also there was a rate reduction on mine after i made 48 consecutive payments on time.
I agree. I can't believe all the posts implying it is better to knock off several low interest loans than it is to knock of one high interest loan.
In fact, if the rate(s) is low enough such as the mortgage - don't accelerate the payments at all. Invest the money. Perhaps refinance the mortgage if possible. My 15 year fixed is 3.675% (I love writing that) no way would I pay that down.
I know for me -- that little one is so little it would make me crazy to get it DONE.
Student loans survive bankruptcy - Just an observation but for me it would be about whether you would reduce monthly outlay and be able to free up income to use/invest elsewhere. Do you have an emergency fund? That's a Dave Ramsey strategy as well I believe. . . . Love the guy!
S Do you have an emergency fund? That's a Dave Ramsey strategy as well I believe. . . . Love the guy!
Uh, the concept of an emergency fund has been around for ... oh ... centuries before Dave Ramsey came on the scene. And Dave is not the inventor of common sense, either.
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