How can I pay my debt? Snowball Vs. High Interest?
Here's my situation: balance of the loan payment rate Stafford Loan 14,252.82 4.00% (fixed) 116.35 Private Loan 24,357.72 8.00% (variable) 348.96 Parent Plus Loan 9,892.95 7.75% (fixed) 247.12 I can either pay the lowest balance first (Dave Ramsey snowball method), or I can pay the loan at the highest rate first. My mind is fried right now and I used a simulator indicated high interest must be paid first (which makes sense). But I made some manual calculation to see how fast I can pay off loans and Kinda has shown that the AMT should simultaneously pay for … I am hoping that this is a financial wizard responding to this and says I'm stupid and pay high interest first makes good sense … Also, if you know what the interest rate CAP variable on a private student loan is it? Thank you!
Dave said that the reason for paying the smallest balance first is because it is psychological "high" to get something worked. From experience, his method works. I did the thing the nerd and calculated how much "faster" it would be reimbursed by the highest% first, it was only about 2 months "soon." Not a big difference! From its website: Myth: I must repay the debt with the highest interest rate first to get out of debt quickly. The truth: You must pay the smallest debt first to create the greatest momentum in your debt reduction. The calculation seems to lean more towards the higher to pay interest debts first, but what I learned is that personal finance is 20 percent head knowledge and 80 percent behavior. You need some quick results to stay pumped enough to get out of debt completely. When you start hitting the debt easier you'll begin to see results and you start to win in debt reduction. We have developed a very practical process, called "Baby Steps" to do one thing at a time and not to complicate the process of debt reduction. The baby steps are the foundation for your Total Money Makeover.
