As we near the time where Debt # 2, Student Loan is paid off (by next month) I need to decide which debt should get priority for a little extra payment every month.

In our new baby budget, I am planning no more than $50 / month for debt snowball. Previously we had been putting $500 a month towards extra debt payments, but things must necessarily change as we go on reduced income without me working.

Here are the choices:
Credit Cards:
1. Mr W's - $4,654 owed, 9.4% interest rate
2. Mine - $4,758 owed, 1.9% interest rate until August, 9.4% after

Student Loans
3. Mine - $12,205 owed, interest is prime + 3%, 7.75% right now
4. Mine - $14,835 owed, interest is prime + 4%, 8.75%
5. Mr W's - $9,356 owed, interest prime + 3, 7.75%
6. Mr W - $11,091 owed, interest 5.5%

Car Loan
7. Both - $10,795 owed, interest prime + 3, 7.75%

Based on interest rates, it seems we should be concentrating on Mr W's credit card right now. This could change though if interest rates increase back to rates as they were a few months ago, and I was paying up to $10.25% on some of the student loans!

Current payment on Mr W's credit card is $146 a month + $50 snowball, total payments will now be $206 / month. Plus any extra if we have it.

Anyone else have any thoughts on this strategy?

5 Comments:

  1. krystalatwork said...
    I think that's the right thing to do. I would throw that money at the debt that has the highest interest rate. Mathematically, that's the best option to go for.

    And like you said, if interest rates increase and your SL end up with the highest rates, then throw it at that instead.
    Quick Lunar Cop said...
    I think that Mr. W's credit card is the right target. Not only does it make sense from a mathematical sense (highest interest rate at the moment), but it would also fit the Debt Snowball profile (smallest amount).

    For your next targets, you should also take into account any tax deductibility of interest on your student loans.
    JW said...
    I think that is a personal decision. I would attack the debt that I WANT to get rid of most.
    Canadian Saver said...
    Did you run your numbers through a debt snowball calculator? It always helped me to go with different scenarios.

    I would pay off the highest interest first too.

    Good luck!
    credit savvy said...
    this always make me laugh how people try to figure out this debt plans.

    eliminate c.c. 1st



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