A few weeks ago, I wrote about the dilemma I had on what my next target of my debt snowball will be. I had a few weeks of time to think about the positives and negatives of my various choices, trying to find something that makes the sense to my wife and I.
This time around, I am going with the numbers approach for debt reduction and seeing how this works mentally.
As much as I want to get rid of the Sallie Mae student loan, it has a really small payment ($105 a month) and by far the lowest interest rate of all of my loans (3.25%). While it is a variable interest rate, it doesn’t look like interest rates are going to raise much if at all for the next year given the economy. Plus the interest on this loan is tax deductible.
I’m going to go with paying off the Hyundai Elantra car loan. It is a huge loan payment to begin with ($317 a month) and I am paying a lot of interest on it right now given it is only 7 months old (with 4.5 years left on it). I can just about double the payment, which should cause the loan balance to drop significantly. Combined with potential big extra payments throughout the year on-top of this doubled loan payment, this seems the right way to go. In the end, I save a ton of interest with this method and the psychological benefit of having no car payments? Priceless!
After that car loan is gone, my wife and I will just have our student loans and mortgage to pay off. Then we can really go ballistic paying those loans off without worrying about car payments.