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Student Loans and Interest

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  • toh627
    replied
    Great, thank you all so much. Especially skydivingchick. That really showed me what I needed to know.

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  • skydivingchic
    replied
    If you want to save the most money, paying debts from highest interest to lowest interest is always the best method, no matter the balances. Right now you are paying a larger dollar amount of interest on loans 2 and 3 because they have a higher balance than loan 1, but you are still paying a lower rate on the money. If you concentrate on paying down the balance of loan 2 or 3, you will be effectively raising your overall interest rate and thus will end up paying more money in the end. Here is a good calculator that will let you order debts however you want for pay off. I used your balances and interest rates listed as well as your minimum payments. I added an extra $180 per month for a total payment of $700 per month toward the debts. If you order them from highest interest to lowest interest, that yields a pay off of October 2015 with a total of $5,575.26 paid in interest. If you order them from highest balance to lowest balance (thus attempting to even out the raw dollar amount of interest paid), you get a pay off of November 2015 with a total of $5,843.77 in interest. So over $300 more toward interest. Not a huge difference over that time span, but a difference none the less. The math will always favor paying the highest interest rate first.

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  • Hector
    replied
    I would try to pay off loan A

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  • bjl584
    replied
    From a practicality standpoint I would say to completely pay off loan A before moving on. Diverting money to B and C will only lengthen the time it takes to pay off A. Any interest you save by moving money to B and C would be lost by extending the term on A.

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  • toh627
    started a topic Student Loans and Interest

    Student Loans and Interest

    I currently have 3 student loans:

    Loan A: $7,000 @ 8.5%; monthly payment of $195.

    Loan B: $10,000 @ 7.9%; monthly payment of $150.

    Loan C: $15,000 @ 6.8%; monthly payment of $175.

    My question is this. I have worked to pay down the highest interest loan (Loan A) for a while now, only paying the minimums on loans B&C. However, now that I have paid off so much of loan A, I am paying around $55 in interest on it whereas the other loans I am paying $80+ on each one. So what I would like to know know is should I switch to paying down loans B&C so that I'm equal to paying around $55 in interest on all of them before I continue paying off loan A, or should I just continue paying down loan A? I know that all the financial websites say to pay off the highest interest rate debt first, but I just feel like I am wasting money on interest on the other loans.
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