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Hi all :)
Actually I know the answer to this but somehow I am reluctant to do it, so I thought I would ask here and see what people say, so that I might be actually convinced.
I have two unsecured Personal loans: $5600 owing at 12.95% interest (Repaying $150 per week) and $5100 owing at 14.55% interest (Repaying $100 per week)
My plan was to get $5000-$6000 savings and just keep it, and then pay off the lower interest loan with my extra income and then would pay off the next loan.
However, now I think what makes more sense is putting the savings to the high interest loan as for now, and use all extra income to pay off that one quickly, and then use extra income to solely pay off the lower interest loan.
paying off loans
Hi Elida,
I think you can keep $2500-3000 in savings and use the rest to pay off any of the two loans. You can also try to make simultaneous payments toward both the loans (if possible). Keep the savings for emergency purposes.
However, if you can't make payments on both at the same time pay off one with your extra income as fast as possible, and then pay off the next. In this case, you can try to pay off the one with the higher interest first.
Thanks,
Aaron
paying off loans
Hi Elida,
I agree with what Aaron has advised. It is better to save a bit less than what you have planned, and pay off your loans more quickly. Now, which loan you will pay off before will depend on how you think. You can either pay off the one with low interest rate or the one with high interest rate.
If you pay off the one with high interest rate first you may feel much relieved. That is how I think :) You may think otherwise.
Thanks.