I've searched for this answer for a while, but my loans are set up in a different way and I'd love some advice. (FYI I don't live in the USA)
Loan 1: Personal loan. It was $200,000 with a 4.95% Fixed Interest
Loan 2: Student loan. It was $80,000 with a 3% Reducing Balance interest
Loan 3: Car loan. It was $ 38,000 with 2.96% Fixed Interest
Minimum payments :
Loan 1 : $ 1806
Loan 2 : $ 446
Loan 3 : $ 389
Currently I am paying
Loan 1 : $ 1810
Loan 2 : $ 1500
Loan 3 : $ 389
At this point, my outstanding balances on the loans are
Loan 1 : $ 285,190.11
Loan 2 : $ 47,639.15
Loan 3 : $ 33,786.84
- Question 1 : I decided to work on the loan with the reducing balance first, but I am wondering if that's the right move. Some articles I've read say I should work on the loan with highest interest (Loan 1, personal loan), but that is a Fixed Interest Loan. Am I doing the right thing?
- Question 2 : I have $ 10,000 that I can pump into one of my loans. I initially planned to put it into Loan 2 (student loan with reducing interest) but again is that the right thing to do?
- Question 3 : My initial plan was to pay off Loan 2 (student loan), then Loan 3 (Car loan) and finally Loan 1 (personal loan). However, the car is almost 2 years old. I may consider selling it in another 2 - 3 years, and it will have a moderate resale value. Is it a good idea to pay extra on a car, that you will eventually sell? My loan for the car is a 9 year loan (hence the low minimum amount)
Any other advice is appreciated. After taxes I make $ 7500 a month. A large portion of it is going into loans. I do not pay rent and my monthly expenses are kept low (I don't eat out often, and I don't shop much). What's a better way to clear my debt?
Thanks in advance!