Getting closer on the credit card debt (less than $1500 to go!) and I can really see how the debt snowball is going to work. Once the red line is gone, then all extra money goes into paying off my car loan, then after that, it all goes to the student loan.
Note: if you are paying interest on debt, then paying it off is the same as getting that same percentage return on a different investment. So, I owe similar amounts on both my car and my student loan, but the car’s interest rate is 2.74% whereas the student loan is 4.25% and the “pain points” are relatively similar. So, when the credit card debt is paid off, what should I do?
Right, after the happy dance.
It seems like it makes more financial sense to snowball the student loan, since the car will be paid off in a couple years anyway. Dave Ramsey probably wouldn’t agree since it has about $2000 higher balance than the car, and his philosophy states lowest balance first.
But if I’m no longer crippled by the big looming credit card debt elephant, then I think I’ll shift my focus to the student loan and save myself more than 1%, which sounds like small potatoes but could add up over time.