Quote:
Originally Posted by Yardjass
Am I missing something here? 10% APR on ten grand for a year is $1000. If you pay off $1000 at the beginning of the year and pay interest on the remaining $9000, you've saved yourself $100. For the 3% loan of $1,000, it is $30 for the year.
|
Sorry, I did do the math wrong (out of practice with my financial calculator
), but it's the other way around. It should be $30.42 and $1047 for the 1000/10000 loans. Because interest compounds monthly and not annually, you pay more than the straight 3% or 10%.
Quote:
Originally Posted by Dadhawk
No, what I'm saying is if I had $1,000 extra to throw at a loan I'm going to pay off the $1,000 loan and owe $0 in interest on it, rather than reduce the balance on the bigger loan and continue to pay interest on both.
In the end (in my simple way of looking at it) your debt is one big number with some composite interest rate against it. So in your example, you have $11,000 in debt with a combined interest payment of $566 a year. Anything you are comfortable in doing to reduce the overall amount owed quickly is a good thing, so there is not real bad answer. That was my primary point.
|
I gotcha. Yeah, the psychological value of getting rid of a debt entirely is valuable. That being said, sending the grand to the higher interest/higher amount loan will still save you more than the interest you lose on the lower/smaller loan.
