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Student Loan Advice
Posted on 5/30/14 at 12:08 pm
Posted on 5/30/14 at 12:08 pm
If I have 15 different loan notes that vary from 1.5k - 20k with varying interest rates from 2.5%-6.8%, is it in my best interest to just pay the smaller amounts off first or go after the big one that I'm paying the most interest on?
My thinking is by paying the smaller ones off first, I can then apply the budgeted payment toward the next loan and multiply my payoff rate.
My thinking is by paying the smaller ones off first, I can then apply the budgeted payment toward the next loan and multiply my payoff rate.
6
Posted on 5/30/14 at 12:25 pm to The Bruce
Time value of money states payoff the higher interest rate loans first then work your way down to the lower rates.
Posted on 5/30/14 at 12:57 pm to The Bruce
quote:
My thinking is by paying the smaller ones off first, I can then apply the budgeted payment toward the next loan and multiply my payoff rate.
You should try to calculate which method will be more advantageous. You can create a payoff schedule pretty easily in Excel.
Posted on 5/30/14 at 1:03 pm to The Bruce
quote:
is it in my best interest to just pay the smaller amounts off first or go after the big one that I'm paying the most interest on?
Debt snowball strikes again.
Financial wisdom says attack the high interest rate first, as you will pay less in total this way.
Dave Ramsey says, emotional victories are important, and you will get a euphoric high from paying off the smallest ones first... and that high will keep you motivated to keep going after the larger balances.
So, are you someone that cares about minor victories and needs the motivation, or not?
Personally... I think way too much thought is put into this. Do whatever you want. The imporant thing is to pay it off by paying as much as you can per month.
Posted on 5/30/14 at 2:40 pm to The Bruce
15 is just mind boggling to me. Is this the new norm? I graduated in 98 and and had two that I later consolidated into one. Do you have to make 15 different payments each month?
My answer is to pay the smallest off first, then as they're paid off, roll the payment from the paid off one into the next lowest.
My answer is to pay the smallest off first, then as they're paid off, roll the payment from the paid off one into the next lowest.
Posted on 5/30/14 at 2:44 pm to The Bruce
quote:
15 different loan notes that vary from 1.5k - 20k with varying interest rates from 2.5%-6.8%
The reality is, these loans are relatively small and the delta in the interest rates is relatively low. The difference in the order that you pay these off is probably a matter of a hundred bucks or so (provided you don't do something objectively unreasonable like paying them in order from lowest interest to highest). The bigger question is how you ended up with 15 different loans?
Posted on 5/30/14 at 3:24 pm to Cold Cous Cous
These are actually my wife's loans. I have $845 total left on my 1 consolidated loan @ 2% interest 
from 2005. This was back when it was easy to refinance at a low rate with incentives. I might never completely pay that one off as it's the oldest acct in regards to credit history.
She has those loans spread out in different groups through salliemae and 2 other servicers.
My thinking is to just knock out the small ones while paying some extra to the biggest (20k@4%).
By knocking the small ones out that's also less on the minimum payments to worry about in case of an emergency, around the holidays, etc.
from 2005. This was back when it was easy to refinance at a low rate with incentives. I might never completely pay that one off as it's the oldest acct in regards to credit history. She has those loans spread out in different groups through salliemae and 2 other servicers.
My thinking is to just knock out the small ones while paying some extra to the biggest (20k@4%).
By knocking the small ones out that's also less on the minimum payments to worry about in case of an emergency, around the holidays, etc.
Posted on 6/1/14 at 8:59 am to iAmBatman
quote:
Time value of money states payoff the higher interest rate loans first then work your way down to the lower rates.
This. Always go after the highest interest rates first. More if your money hitting principal instead of interest.
Posted on 6/1/14 at 9:31 am to Brettesaurus Rex
I'd pick two to really focus on - the highest interest rate and the quickest to pay off. Kind of split the above advice down the middle - you get to tackle the one that costs you the most but you also get to chip away at those minimum payments too should something happen and you have to cut spending for an emergency.
Posted on 6/1/14 at 12:12 pm to The Bruce
Tackling smaller ones first doesn't make much since except for moral victories.
For ex. I'm on 10 year repayment cycle
I have one in the 3,000 range, monthly payment is 50$ or so.
Largest one is around 46,000$, monthly payment is approx 650$. Both interest rate 6-7%. So if I pay extra on the 3k one, I'm only really saving 50$ a month. If I pay more on the large one then I am saving more in interest in the long run than I would be paying off the small one.
For ex. I'm on 10 year repayment cycle
I have one in the 3,000 range, monthly payment is 50$ or so.
Largest one is around 46,000$, monthly payment is approx 650$. Both interest rate 6-7%. So if I pay extra on the 3k one, I'm only really saving 50$ a month. If I pay more on the large one then I am saving more in interest in the long run than I would be paying off the small one.
This post was edited on 6/1/14 at 12:28 pm
Posted on 6/1/14 at 12:39 pm to DaBeerz
3,000 at 6% and 46,000 at 6% is 49,000 at 6%. You will not save more or less by paying off one loan before the other.
Posted on 6/1/14 at 12:43 pm to lsu711
They are not equal, the 46k one is 1% higher. I pay as much interest as principal on that one. FML. One day I will be free
Posted on 6/2/14 at 6:21 am to DaBeerz
quote:
They are not equal, the 46k one is 1% higher. I pay as much interest as principal on that one. FML. One day I will be free
I'm there with you.
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