Friday, March 7, 2008

Tax Refund

I would like to start off this post by saying - I always wondered how bloggers had enough information to write about to keep posting daily without running out of ideas, but now I totally get it. That being said, I got my federal tax refund back today! While it is only $1374.00 - that is going to make a dent in some debt that I have. Now, the big question??? What debt to I apply it to. I know that traditional logic says that I should apply it to credit card debt because it is at the highest interest rate, but I was thinking about applying it to my student loans. Here is my logic - I have a little over $107,000 worth of student loan debt. (You didn't read it wrong...$107,000). So, while it is at a lower interest rate, it still accrues more interest a month than my credit card debt (a little under $5000) because there is more principal. Also, I was thinking that if I didn't accelerate my student loan due date, then my student loan payment every month may decrease as a result and free up a little extra money each month to apply towards my credit card debt. What does everyone else think? Should I still apply it towards my credit card debt or actually go against traditional logic and apply it towards my student loan debt?

2 comments:

change is a good thing said...

I'm a fan of getting rid of credit card debt first, it's miniscule compared to your student loans, you can't take the tax benefit for it and once your CC debt is paid off you will only have your student loan debt which you can really accelerate your payments to. Plus if you use it toward your credit card debt, you will knock out over 25% of that remaining balance, that is huge! Just my $.02. Not sure if that helps or not. :)

Bouncing Back said...

I think you need to figure out which debt bothers you the most, student loan, credit card,car...and then work pay that off.

Wow $107,000 of Student Loan Debt. I down to my last $6000 from almost $50,000 in SL and thought that was HUGE!

Good luck and happy blogging!