We paid off another loan! Woohoo!!! It feels great to know we are slowly, but surely, making some progress. Since our move, everything has been a little crazy, and we finally starting to get our new budget in order again. Since this loan was a little bit smaller, we decided to take all the extra money we had and just pay it off with one lump sum. Hopefully next month we will have determined how much we can put toward out loans each month and really start working the "snowball".
The thing that just kills me about loans are the interest. If for no other reason, I would just want to pay off these loans to avoid the interest that we are racking up. Phil took this loan out while he was still completing his undergrad and the total principal was $5,500 at 6.4%. We had already paid around $1,100 on it before he started his Masters at Thunderbird and then it went into deferment while he was in school (but it was still accruing interest). So guess how much we had to pay to pay off the loan in full? $5,550.54!!! That's more than the initial loan was even for! And that is not even including the $1,100 we had already paid in the past, so it was all that interest just adding up over time. And that's just one of our "small" loans. That's nothing compared to the $18,000 loan at 7.9% interest! Yikes.
So, we are really trying to just put as much money to these as we can and knock down the principal so the interest doesn't just swallow us up. The best thing you can do is to never borrow money in the first place (we have learned our lesson). The next best thing you can do is pay more than the minimum payment on the debt you do have. When you make a payment, the amount goes toward paying off the interest it has accrued first and then the principal, so if you only pay a little it basically does nothing to get your loan amount down.
We are definitely in this for the long haul, but we know it will be worth it in the end.
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