Date: Sun, 8 Apr 2007 06:12:38 -0500
From: "Daniel T." 
Newsgroups: misc.invest.financial-plan
Subject: Re: What to pay off first--student loan vs. car loan
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joetaxpayer  wrote:
> Daniel T. wrote:
> > denise.regan@gmail.com wrote:

> > > I currently have 2 loans oustanding
> > >
> > > 1) Car loan  ~$13,000 at 5.49% interest rate.
> > >
> > > 2) Student loan ~$38,000 at 3.875% interest rate.
> 
> 
> > I'm just a beginner at this stuff myself, but here is my
> > thinking...
> > 
> > Let's say you can put an extra $1,000 over and above the minimum
> > payments on one of the loans to help pay it off. Which would save
> > you the most money? Well if you put the thousand on the car loan,
> > you will save $54.90 times the number of years left on the loan.
> > If you put the thousand on the student loan you will save $38.75
> > times the number of years left on it. So how many years are left
> > on each?
> 
> That logic will produce flawed results.

Why? I'm just learning here. It seems to me that if putting a $1,000 on 
one loan would save me $275 (assuming loan 1 is 5 years) and putting a 
$1,000 on the other would save me $387 (assuming loan 2 is 10 years) 
then I should put the money on the one that saves me the most...

> It would suggest that a 30 yr loan at 4.5% should be repaid faster
> than a 12% credit card that has a 5 year payback.

That would depend on how much you owe on each.