July 18, 2024
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THE MONEY MINDER

‘Does it make the most sense to put all the money towards the loan with the highest interest rate?’: I have $65k in student loans and $17k saved. How can I pay off my debt strategically?

‘Does it make the most sense to put all the money towards the loan with the highest interest rate?’: I have k in student loans and k saved. How can I pay off my debt strategically?

Hey Money Minder,

I’ve got a dilemma with my student loans. I owe a total of $65k (15k+20k+30k) to a private lender and I’ve got $17k saved up that I want to throw at them. The interest rates on the loans are pretty high – 12% for the $15k and $20k loans, and 13% for the $30k loan. I’m torn between paying off the highest interest rate loan first or just wiping out the $15k loan entirely. What do you think?

Farewell from Savings Seeker

Response from THE MONEY MINDER:

Hello There,

In your situation, it makes the most financial sense to prioritize paying off the loan with the highest interest rate first, which in this case is the $30k loan with a 13% interest rate. By doing so, you will reduce the amount of interest that accrues over time, ultimately saving you more money in the long run.

After paying off the $30k loan, you can then focus on tackling the $15k and $20k loans with 12% interest rates. Given the remaining balance and interest rates on these loans, it might be a good idea to pay off the $20k loan next, followed by the $15k loan.

By strategically allocating your $17k savings towards the loans with the highest interest rates first, you will be able to reduce the overall amount of interest you pay over time, saving you money and helping you pay off your loans more efficiently.

Ultimately, creating a plan to pay off your student loans based on interest rates and loan amounts will put you in a stronger financial position in the long term. Good luck with your repayment strategy!

Farewell from THE MONEY MINDER.

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