Comments on: How To Pay Off Debt: 3 Methods Examined http://www.moneyrelationship.com/debt/how-to-pay-off-debt-3-methods-examined/ Eliminate Debt, Enjoy Life Wed, 08 Feb 2012 06:34:04 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Greghttp://www.moneyrelationship.com/debt/how-to-pay-off-debt-3-methods-examined/#comment-45358 Greg Sun, 20 Nov 2011 17:22:46 +0000 http://www.moneyrelationship.com/?p=1715#comment-45358 This is an interesting site. I have an advanced degree in applied math and have worked in finance (I-Banking and quantitative analysis) for quite a few years now. My younger sister is starting to ask some of these questions about her own student loans so I'll offer some of what I discussed with her. Mathematically, there are two approaches. Maximize cash flow today or minimize how much total interest you pay. If you want to have more cash available to you each month asap (uncommitted to debt service) then you should use the "debt snowball" as mentioned above. Minimizing interest is a much harder question. Say you have $20,000 at 3% and $1,500 at 7%. Even though the smaller loan is at a higher interest rate it only accrues $8.75 per month. The larger loan accrues $50. In terms of savings per $1 prepaid, paying off the lower interest rate loan is better. The problem becomes much more complex when you consider different loan terms and the impact of prepayments on the remaining life of the loan and if you really want to get fancy you have to consider the yield of your prepayments against alternative investments. Obviously though, doing anything to take control of debt is better than nothing. Good luck. This is an interesting site. I have an advanced degree in applied math and have worked in finance (I-Banking and quantitative analysis) for quite a few years now. My younger sister is starting to ask some of these questions about her own student loans so I’ll offer some of what I discussed with her. Mathematically, there are two approaches. Maximize cash flow today or minimize how much total interest you pay. If you want to have more cash available to you each month asap (uncommitted to debt service) then you should use the “debt snowball” as mentioned above. Minimizing interest is a much harder question. Say you have $20,000 at 3% and $1,500 at 7%. Even though the smaller loan is at a higher interest rate it only accrues $8.75 per month. The larger loan accrues $50. In terms of savings per $1 prepaid, paying off the lower interest rate loan is better. The problem becomes much more complex when you consider different loan terms and the impact of prepayments on the remaining life of the loan and if you really want to get fancy you have to consider the yield of your prepayments against alternative investments.

Obviously though, doing anything to take control of debt is better than nothing. Good luck.

]]> By: Adamhttp://www.moneyrelationship.com/debt/how-to-pay-off-debt-3-methods-examined/#comment-4468 Adam Thu, 05 Aug 2010 01:44:34 +0000 http://www.moneyrelationship.com/?p=1715#comment-4468 We went with the debt tsunami mostly because we have some family debt that we wanted to get rid of. Good luck, I'm sure you will do fine! We went with the debt tsunami mostly because we have some family debt that we wanted to get rid of.

Good luck, I’m sure you will do fine!

]]> By: greengeekgirlhttp://www.moneyrelationship.com/debt/how-to-pay-off-debt-3-methods-examined/#comment-4467 greengeekgirl Thu, 05 Aug 2010 01:38:04 +0000 http://www.moneyrelationship.com/?p=1715#comment-4467 I really love this debt tsunami approach--I think we're going to employ that. We're about 10k in debt, which is ... maybe 1/3 of our annual income :( I really love this debt tsunami approach–I think we’re going to employ that. We’re about 10k in debt, which is … maybe 1/3 of our annual income :(

]]> By: Adamhttp://www.moneyrelationship.com/debt/how-to-pay-off-debt-3-methods-examined/#comment-4374 Adam Thu, 01 Jul 2010 16:33:11 +0000 http://www.moneyrelationship.com/?p=1715#comment-4374 I'm 100% with Joe on this one Mari. It is a scam and they will take your money for no good reason. What they sell you is something that you can do on your own for free. I doubt your brother can get his money back but at least you can warn your family/friends in the future. I’m 100% with Joe on this one Mari. It is a scam and they will take your money for no good reason. What they sell you is something that you can do on your own for free. I doubt your brother can get his money back but at least you can warn your family/friends in the future.

]]> By: JoeTaxpayerhttp://www.moneyrelationship.com/debt/how-to-pay-off-debt-3-methods-examined/#comment-4373 JoeTaxpayer Thu, 01 Jul 2010 16:13:13 +0000 http://www.moneyrelationship.com/?p=1715#comment-4373 Mari - unfortunately, the software you reference is a scam. The three methods here will beat that product and do it without getting robbed of their $3500 fee. UFirst is not a bank, not a financial adviser, they sell software which is marketed using fraudulent claims. Search around, and you can read hundreds, if not thousands, of posts on this product. Mari – unfortunately, the software you reference is a scam. The three methods here will beat that product and do it without getting robbed of their $3500 fee. UFirst is not a bank, not a financial adviser, they sell software which is marketed using fraudulent claims. Search around, and you can read hundreds, if not thousands, of posts on this product.

]]> By: Mari Lovalvohttp://www.moneyrelationship.com/debt/how-to-pay-off-debt-3-methods-examined/#comment-4372 Mari Lovalvo Thu, 01 Jul 2010 15:50:24 +0000 http://www.moneyrelationship.com/?p=1715#comment-4372 Yes, paying off debt, and learning to live without it is the only way to have a good, and satisfying life. There are so many new ways of accelating debt payment. United First Bank offers a computer software program that allows one to eliminate all debt very quickly, including motgage loans. The way it works is that without having to make any extra money, the software program works as an interest cancellation on the debt. In a very short time, the debt is paid off very quickly. I have no debt, so I did not have to use it but my brother has been doing it and he has already saved thousand of dollars in the last 6 months. Excelllent way to go. Congrats on your blog. It's good! Yes, paying off debt, and learning to live without it is the only way to have a good, and satisfying life. There are so many new ways of accelating debt payment. United First Bank offers a computer software program that allows one to eliminate all debt very quickly, including motgage loans. The way it works is that without having to make any extra money, the software program works as an interest cancellation on the debt. In a very short time, the debt is paid off very quickly. I have no debt, so I did not have to use it but my brother has been doing it and he has already saved thousand of dollars in the last 6 months. Excelllent way to go. Congrats on your blog. It’s good!

]]> By: Laurahttp://www.moneyrelationship.com/debt/how-to-pay-off-debt-3-methods-examined/#comment-3664 Laura Fri, 26 Feb 2010 21:17:50 +0000 http://www.moneyrelationship.com/?p=1715#comment-3664 I really love the Debt Tsunami idea. In nothing that I have read has it ever suggested that emotion be a factor in budgeting consideration, yet emotion is the thing that drives us into debt in the first place. How very clever. .-= Laura´s lastest post ..<a href="http://laurametzger.com/archives/luck-stew" rel="nofollow">Luck Stew</a> =-. I really love the Debt Tsunami idea. In nothing that I have read has it ever suggested that emotion be a factor in budgeting consideration, yet emotion is the thing that drives us into debt in the first place. How very clever.
.-= Laura´s lastest post ..Luck Stew =-.

]]> By: Kristen Escovedohttp://www.moneyrelationship.com/debt/how-to-pay-off-debt-3-methods-examined/#comment-3591 Kristen Escovedo Tue, 02 Feb 2010 16:35:42 +0000 http://www.moneyrelationship.com/?p=1715#comment-3591 Great post. I love how you explained each method. My husband and I started this process several years ago with Dave Ramsey's method. It eventually turned into a hybrid method that worked for us due to some unforeseen medical bills. The most important thing we did was keeping the list visible. We posted it on our bathroom mirror. It was painful to start with, but as we paid off one thing and then another, we felt a sense of victory. We are about to pay off our second car, leaving only our mortgage and student loan. You are right that you have to pick something that will work for you, but those victories are important - at least they were for us. .-= Kristen Escovedo´s lastest post ..<a href="http://lifeswaitingrooms.blogspot.com/2010/01/waiting-for-applause.html" rel="nofollow">Waiting for Applause</a> =-. Great post. I love how you explained each method. My husband and I started this process several years ago with Dave Ramsey’s method. It eventually turned into a hybrid method that worked for us due to some unforeseen medical bills. The most important thing we did was keeping the list visible. We posted it on our bathroom mirror. It was painful to start with, but as we paid off one thing and then another, we felt a sense of victory. We are about to pay off our second car, leaving only our mortgage and student loan. You are right that you have to pick something that will work for you, but those victories are important – at least they were for us.
.-= Kristen Escovedo´s lastest post ..Waiting for Applause =-.

]]> By: Damon Dayhttp://www.moneyrelationship.com/debt/how-to-pay-off-debt-3-methods-examined/#comment-2830 Damon Day Mon, 05 Oct 2009 05:44:48 +0000 http://www.moneyrelationship.com/?p=1715#comment-2830 All three methods can work very well. As has been said, the key ingredient is the consumer and their attitude about the debt. For some it is strictly a numbers game as David suggests, and for others it is all about getting some small victories racked up quickly as Dave Ramsey suggests. It is up to the individual to decide what will work best for them. Great post Chris. .-= Damon Day´s lastest post ..<a href="http://damonday.com/201/debt-help-who-can-you-trust/" rel="nofollow">Debt Help - Who can You Trust</a> =-. All three methods can work very well. As has been said, the key ingredient is the consumer and their attitude about the debt. For some it is strictly a numbers game as David suggests, and for others it is all about getting some small victories racked up quickly as Dave Ramsey suggests. It is up to the individual to decide what will work best for them. Great post Chris.
.-= Damon Day´s lastest post ..Debt Help – Who can You Trust =-.

]]> By: Alanhttp://www.moneyrelationship.com/debt/how-to-pay-off-debt-3-methods-examined/#comment-2767 Alan Mon, 24 Aug 2009 22:49:52 +0000 http://www.moneyrelationship.com/?p=1715#comment-2767 Your article on this blog is fantastic. Well done! I'm a big fan of your blog and be sure to keep up the great work. I plan on returning and linking to your site. Sincerely, Author The Alan Haft Blog, Your article on this blog is fantastic. Well done! I’m a big fan of your blog and be sure to keep up the great work.
I plan on returning and linking to your site.

Sincerely,
Author
The Alan Haft Blog,

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