Tuesday, May 14, 2013

What Debt to Pay?

I'm typing this post because I know the logical choice but its not the emotional decision I want to make. I want to devote all of our "extra" resources to paying off our new tractor. Here is a list of our debts. You tell me what you would try to pay off first.

Car 0%, $350 payment, $8400 balance

Student loan 4.5%, $150 payment, about $3000 balance

Tractor 3.75% currently, $587 payment, $25,215 balance. We planned to transfer this to our line of credit but haven't because the rate would be 4.25% with an interest only payment of about $90. Might as well keep the lower interest rate while we can.

If you remember from a few posts back, I was going to try to wipe out most of the student loan in April. I'm on commission and some things were pushed back. Its just how commission works. This is a good month for pay though.

What debt would you pay first?


  1. You only owe $3K on your student loan, I'd knock that one out of the way first (also highest interest rate) then move your focus to the tractor. :) Good luck!!

  2. Is the interest rate on your student loan or tractor loan tax deductible? If so, I would figure out what the after tax interest rate is on both loans and pay off the higher one first :D Some people like to pay off the loan with the lowest balance first, I believe they call it a debt snowball lol, but I personally prefer the pragmatic approach.

  3. Given that your student loan has the highest rate and lowest amount owing, I'd knock that sucker out of the park. Be done with the debt from accomplishing your education. Next move onto that 3.75% loan...or maybe begin working on the car loan just to get it done...

  4. Student loan. It should be easy to knock out and then you can apply the payments to whichever debt you'd like.

  5. I would go for the student loan! Then combine that debt repayment with the car, then move it all to the tractor. I tend to pay off smaller debts first, even if it technically costs more - because it feels good.

  6. Is the car loan 0% long term? Or just for a while?

    As the data stands, I too would vote the student loan. Just knock that one out of the park and you will have extra resources to go after the tractor (or the car).

  7. Normally I would say SL > tractor > car to pay it all off in order of interest rate. But, you might get a quicker boost to your monthly cash-flow if you go SL > car > tractor since the balance on the tractor is so high. What's your monthly payment on the car?