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A discussion about debt.

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Jump to page : 		Last activity 2014-08-21 12:02 PM
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applover20
Reg. Jul 2007
Posted 2014-08-21 11:57 AM
Subject: RE: A discussion about debt.



Extreme Veteran


Posts: 357
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Location: Florida		If you are looking at overall total savings and getting it paid off the quickest, then go with paying off the higher interest rates first. But another factor to consider is whether or not the interest in deductible on your tax return. Home mortgage and student loan interest are both deductible expenses, so you would want to factor that in the consideration as well.

If you need the feeling of satisfaction in reducing the # of different debt payments each month, then starting with the smallest is better.

But going with the interest rate you can also create a spreadsheet of total debt each month and see the continual decrease and that might provide the satisfaction needed to see the difference you are making in reducing your debt.

Someone mentioned earlier the issue of simple vs. compound interest, but if you are making monthly payments that is a moot point. Compound interest is only a factor if you are not making payments and the interest is accumulating. When you make payments the first portion of the payment is applied to the interest accumulated from the date of last payment to the date of current payment and then the remaining amount applies to principal. So if you are paying the current month's interest and some of the principal, then each month's interest is calculated on the remaining principal balance and therefore is simple interest.
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Nevertooold
Reg. Oct 2003
Posted 2014-08-21 12:02 PM
Subject: RE: A discussion about debt.



I Prefer to Live in Fantasy Land


Posts: 64864
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Location: In the Hills of Texas		We've been debt free for over 18 years and we really don't know how people make it in today's world if they have a lot of credit debt and a mortgage.
 
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